entrepreneurship - the midas touch

7/29/2019 Entrepreneurship - The Midas Touch

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Section - B Group - 4

ENTREPRENEURSHIP

THE MIDAS TOUCH?

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Table of Contents

What is Entrepreneurship…………………….………………………3Methodology of Research……………………………………………4

Types of Entrepreneurs………………………………………………5

Characteristics of an Entrepreneur………………………………….6

1. Psychological Characteristics………………………………………….6

2. Sociological Characteristics…………………………………………….6

3. Behavioral Traits…………………………………………………………7

Cultural and Social Influences……………………………………….10

Family Influence………………………………………………………10

Personality Analysis…………………………………………………..11

Cognitive Dissonance………………………………………………...13

1. What is Cognitive Dissonance?...................................................13

2. Dissonance in Entrepreneurs………………………………………….14

Can Entrepreneurship be cultivated………………………………...16

Interview of an Entrepreneur…………………………………………17

Entrepreneurial Orientation Inventory Test…………………………19

Key Drivers of Entrepreneurship…………………………………….22

References……………………………………………………………..23

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What is Entrepreneurship?

As per the Oxford Dictionary “an entrepreneur is a person who sets up a business or

businesses, taking on financial risks in the hope of profit ”.

“Entrepreneur is one who always searches for change, responds to it, and exploits it isan opportunity. Entrepreneurs innovate.” -Peter Drucker

"Entrepreneurship may be defined in simplest terms as the utilization of one productivefactor of the other productive factors for the creation of economic goods."- Arthur Cole

Two widely cited contributors to the Encyclopedia of Entrepreneurship (1982), A

Shapero and L. Sokol argued, from a sociological position, that all organizations andindividuals have the potential to be entrepreneurial. In their view entrepreneurship ischaracterized by an individual or group's initiative-taking, resource gatheringautonomy, and risk taking.

Entrepreneurship comes from entrepreneur, anglicized from the original French word

Entrepreneurship is much more than simply setting up your own business. It is actually

a process in which a person identifies opportunities, allocates resources, and takes risk

to create a successful or profit making business model. An entrepreneur creates value

in terms of creating employment opportunities. Entrepreneurs see “problems” as“opportunities” then take action to identify the resources needed to find solutions to

those problems.

Entrepreneurs play a paramount role in today’s market driven economy. Entrepreneur

is somebody who engages in business running anything from multi crore corporations

to street vendors for profit. They play increasingly important role in sustaining

commerce today especially since the mantra now is that of privatization.

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Methodology of Research

The research methodology involved collecting information from journals, books, online

resources. We also interviewed few budding entrepreneurs and asked the genera

public about their views about entrepreneurs. We made people give an Entrepreneuria

Orientation Inventory test. We analyzed the psychological and sociologica

characteristics of an entrepreneur and studied their behavioral traits. We tried to

understand the social, cultural and family influences on an entrepreneur. We did a

personality analysis on entrepreneurs and analyzed cognitive dissonance in

entrepreneurs. We also checked if entrepreneurship can be cultivated. Based on the

studies above we recognized key drivers for an entrepreneur.

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Types of Entrepreneurs

According to Clarence Danhof entrepreneurs can be classified into the following four

types based on economic development:

1. Innovative Entrepreneur

Innovative Entrepreneurs will be finding out new products using the new combination

of raw materials, will create new market, will hold a monopoly market, and wil

introduce the new technology of production. Example: Steve Jobs, the founder of iPod,

Michael Dell, founder of Dell Computers.

2. Imitative Entrepreneur

Imitative Entrepreneurs will be finding out products those have been invented earlier

in other countries but new in that particular region or country. The imitative

entrepreneurs will do business of an existing product in any other country. Example

Walton BD has introduced its motorbikes, refrigerators, televisions and other electronic

appliances in Bangladesh not being the original inventor of those products.

3. Fabian Entrepreneur

Fabian Entrepreneurs are those who remain unaware of the change in the era of aparticular product they are involved in business with. But when their market leadership

goes down they seem to understand the change. Example: Kodak, a company that

happened to be market leaders in producing analog cameras but they did not realize

the change and the introduction of digital cameras.

4. Drone Entrepreneur

Drone Entrepreneurs are those who remained unaware of the change but they

always remain the same with their business policies. They do not bother aboutchanging their policies. Example: Citycell Telecom Bangladesh, in spite of having

knowledge about their market fall, they have not yet changed their business policy

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Characteristics of an Entrepreneur

Psychological Characteristics

• Need for achievement

• Independence

• Drive

• Self confidence and will power

• Need for power

• Discipline

• Propensity to take risk

• Creativity

• Ambition

• Recognition

• Benevolence

• Adaptability

Sociological Characteristics

• Leadership

• Social Mobility

• Family background

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Behavioral Trait

• Confidence

• Independence

• Optimism

• Persistence, perseverance

• Hard work, drive, energy

• Initiative

• Likes challenges

•Leadership behavior

• Responsiveness to suggestions, criticisms

Some of the characteristics that we thought were important are as under:

Need for Achievement

Entrepreneurs are high in need for achievement and are goaded by their inner-self that

motivates their behavior towards accomplishment. Though they value money, they

view profits as a measure of their competence. According to McClelland they prefer to

take personal responsibility for decisions, and are moderate risk takers.

Risk-bearing

Entrepreneurs are essentially persons who take decisions under uncertainty, and

therefore are willing to bear risk, but never gamble with the results. This is evidenced

by market-studies, exploring alternative lines of production or a new product mix, or a

new combination of inputs, etc. They set goals that require a high level of performance.

Hope of success

It is a significant quality of entrepreneurial personality. Entrepreneurs tend to set their

tasks with a hope of success rather than a fear of failure, because they set their tasks

on the basis of facts and their ability to maneuver them to their advantage.

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Sense of efficacy

Entrepreneurs have a sense of control over a situation and present themselves as

action oriented persons striving towards goals. Being confident of their abilities and

resources, they see themselves as problem-solvers rather than problem-avoiders, as

pioneers rather than conformists. They have goals for the future and plan to reach

them.

Locus of control

Closely related to the concept of a high need for achievement is the belief in the

internal locus-of-control. An individual perceives the outcome of an event as being

either within or beyond his personal control. Entrepreneurs tend to believe in their own

ability to control the outcome of their efforts by influencing the existing environment

rather than leave everything to luck. They strongly believe that they can shape their

own destiny.

Need for independence

The desire for an independent career is often the prime factor for setting-up one’s own

business so that one can use his own resources in his own way for his own benefit.

Time orientation

Entrepreneurs anticipate future trends on the basis of past experience. However, they

are neither die-hards nor utopians. They are pragmatic to the core.

Competition and collaboration

While Entrepreneurs are competitive in achieving their goals, they collaborate with

others when it furthers their goals.

Openness to feedback and learning from experience

Successful Entrepreneurs continuously modify their plans on the basis of the feedback

they receive from the environment around them. They learn from their experience andoften do better by re-0learning and un-learning. They are not easily discouraged by

failures.

Need to influence others

Once an Entrepreneur sets his goal, he has to play the role of a manager too, for

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influencing others.

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Cultural and Social Influences

Cultures where people are risk averse are not conducive to entrepreneurship. Instead

the culture of consumerism where people desire material goods encourages

entrepreneurship as the desires of the people lead to new opportunities in the market.

The workplace peers and the social composition of the workplace are a significant

influence on a budding entrepreneur. Higher entrepreneurial activity is found in

societies where the entrepreneur is considered to have a high social status

Unstable political conditions where government policies change frequently discourage

business.

The availability of infrastructure and utilities and lack of corruption and bureaucratic

delays encourage entrepreneurship.

The purchasing power of the people and economic prosperity of the region, plays a

major role in the success of entrepreneurial ventures.

Countries having draconian labour and environmental laws that make compliance very

difficult create a barrier to entrepreneurship.

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Family Influences

In a survey spanning 1800 SME operators around Australia, it was found that they

tended to come from larger families (families with an average of 3.54 children). It was

found that business owners tend to be born higher in the birth order of their families.

Eldest siblings accounted for 41% of owners, with middle siblings making up 29%,

followed by youngest children at 25%. Only 5% of business owners are only-children.

More than 60% were the only siblings in their families with their own venture.

Being raised in a family that is entrepreneurial significantly impacts individuals

intentions to start their own businesses.

Having role models is a significant factor in wanting to start a business and selfemployed parents tend to be especially relevant as mentors and guides for children

starting their own businesses.

People who have a parent or close family member, who is self-employed are more

likely to follow an entrepreneurial. A family business background leads perhaps to

lower barriers to entrepreneurial entry, since those having it may capitalize on their

social ties and social capital. Family capital refers to the totality of resources of the

owning family members and has three components (human, social, and financial).

Research has shown that family social capital, described as non-financial resources

and support offered by family members to the entrepreneur affects positively the start-

up decision.

The family perspective describes the impact and the importance of parents on the

entrepreneurial career of their offspring. Both the breadth and the quality of family

business experience matter. Experiences during early childhood and socialization at

home and in school probably shape the attitudes of young people towards

entrepreneurship. Parents act as initial role models and the parents active in a familybusiness influence the future entrepreneurial intentions through changing attitudes and

beliefs as for example self-efficacy.

Personality Analysis11




We did a personality analysis of Entrepreneurs based on the Big Five Personality

Model. Following were the results:

Extraversion :Entrepreneurs are generally extroverts. However there are lots of examples

of successful entrepreneurs who were introverts e.g. N.R.Narayana Murthy

When the need arises a true entrepreneur does what needs to be done.

Agreeableness :

Entrepreneurs are in general cooperative, warm and good natured.

Conscientiousness :

Entrepreneurs are hard-working. Majority of them are organized and

structures their work very well.

Emotional Stability :

Entrepreneurs handle pressure situations very well. They are very

confident and like to take risks.

Openness to experience :

Entrepreneurs are open to new ideas from their colleagues as well as

employees. They are always on the lookout for new opportunities and when

the opportunity comes they grab it with both their hands.

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Cognitive Dissonance

What is Cognitive Dissonance?Cognitive dissonance is a discomfort caused by holding conflicting ideas

simultaneously. The theory of cognitive dissonance proposes that people have a

motivational drive to reduce dissonance. They do this by changing their attitudes,

beliefs, and actions. Dissonance is also reduced by justifying, blaming, and denying

Experience can clash with expectations; People are biased to think of their choices as

correct, despite any contrary evidence. This bias gives dissonance theory its predictive

power, shedding light on otherwise puzzling irrational and destructive behavior.

Smoking is often postulated as an example of cognitive dissonance because it is

widely accepted that cigarettes can cause lung cancer, yet most people want to live a

long and healthy life. In terms of the theory, the desire to live a long life is dissonant

with the activity of doing something that will most likely shorten one's life. The tension

produced by these contradictory ideas can be reduced by quitting smoking, denying

the evidence of lung cancer, or justifying one's smoking. For example, smokers could

rationalize their behavior by concluding that only a few smokers become ill, that it only

happens to very heavy smokers, or that if smoking does not kill them, something else

will. While chemical addiction may operate in addition to cognitive dissonance for

existing smokers, new smokers may exhibit a simpler case of the latter.

This case of dissonance could also be interpreted in terms of a threat to the self-

concept. The thought, "I am increasing my risk of lung cancer" is dissonant with the

self-related belief, "I am a smart, reasonable person who makes good decisions."

Because it is often easier to make excuses than it is to change behavior, dissonance

theory leads to the conclusion that humans are sometimes rationalizing and not

always rational beings.

Whenever there exists a difference in personal goals and the organizational goals,

cognitive dissonance occurs. The recent global recession in the U.S. was a striking

example of a lack of organizational culture. The subordinate to primary (or the sub-

prime) crisis was the aftermath of lending to subordinate real-estate investors who put

their money into structured investment vehicles leaving aside the promising primary

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http://en.wikipedia.org/wiki/Drive_theory

http://en.wikipedia.org/wiki/Rationalization_(psychology)

http://en.wikipedia.org/wiki/Rationality

http://en.wikipedia.org/wiki/Rationalization_(psychology)

http://en.wikipedia.org/wiki/Rationality

http://en.wikipedia.org/wiki/Drive_theory




investors, at a heavy rate of interest, with a view to reap quick profits. It is one of the

striking events of failure of corporate governance. Big financial players like Lehmann

Brothers had to wind up their business. The recession in the U.S. had its terrible

consequence on personnel management – Organizations had to undertake critical

decisions in manpower retrenchment. The incident witnessed heavy job losses and

insolvency. Again, going back to the pages in history, the U.S. had earlier had a similardownturn, popularly known as the Great Depression of 1929. It could be gauged that

there was no learning from the past – learning in its true sense, would have produced a

change in behavior due to experience. It can only be said that the individuals could not

identify their personal goals along with their organizational goals, as a result of which

there was cognitive dissonance.

Dissonance in Entrepreneurs

Cooper, Woo and Dunkelberg (in a study in 1988) found that entrepreneurs who have

made the decision to become business owners show a remarkable degree of

optimism. They see their own odds of success as extremely high (81% perceived the

odds of 7 out of 10 or better, of which 33% regarded their chances as 10 out of 10).

This extreme tendency toward optimism may be explained by a cognitive dissonance

which leads the entrepreneur to exaggerate the attractiveness of an option after it has

been chosen, although a psychological trait involving a propensity to take risks and

strong internal locus-of-control beliefs may also play a role. The study also showed that

those entrepreneurs who were well prepared seemed equally optimistic.

This may indicate that entrepreneurs are unable to assess their own strengths and

weaknesses and the early progresses of their own firms, but also that al

entrepreneurs, whether prepared or not, experience “entrepreneurial euphoria” in

which they feel that success is certain.

If we consider the Indian Market, the cognitive dissonance is that a very low

percentage of the young MBAs from our talented pool of B-schools take the plunge

Considering the current scenario, one feels that they have the best shot at making a

real socioeconomic impact; however, the numbers are very feeble for a land of

immense opportunities like India. The reasons for this dissonance could be many; it

could probably be the influence of working for 200 years for somebody, or the

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dissonance that exists between excellence in academics and entrepreneurship.

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Can entrepreneurship be cultivated?

Is entrepreneurship an innate quality or an acquired skill? Can entrepreneurial acumen

be achieved and enhanced through education and training or are certain people born

to be “entrepreneurs” or to act entrepreneurially?

“While there are several elements that can be taught to enhance the knowledge and

success of entrepreneurs, entrepreneurship is something one can learn only by doing”

- Richard Goossen CEO of M&A Capita

Corp

Three entrepreneurial elements that can be taught –

1. General business knowledge - "the nuts and bolts of management principles and

strategic thinking."

2. General entrepreneurial principles - what other people have done and where they

made mistakes.

3. To be alert to opportunities in certain fields in a general sense.

What can't be taught is - "venture specific opportunity principles." i.e. the ability to

understand and see specific niches in a market and recognize whether it will be

successful or not.

To sum up the belief that an Entrepreneur is born is an absolute myth

Entrepreneurship is a science and the entrepreneurial acumen is something you

acquire with experience after taking a leap in the pool of entrepreneurship.

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Interview

Mr. Kunal Rajput is a budding photographer. His work has been published in India's

leading newspapers like Hindustan Times, Times of India and magazines like BetterPhotography. He graduated as a software engineer and worked with a large multi-national company before abandoning his job and a lucrative offer from NationaInstitute of Design to setup his own photo studio in New Delhi

Team: Good Evening Mr. Kunal. Thanks a lot for taking time out of your busy scheduleand talking to us. Let us get directly to the point – A secure Job at InfosysTechnologies Ltd. and then a seat in the prestigious National Institute of Design –

What motivated you to leave all this and start your own Venture?Kunal: Have you seen the movie 3 Idiots? The role that Madhavan plays is exactly thestory of my life except for the fact that I completed my engineering. The decision to doengineering was taken mainly out of peer pressure and at the request of my parents.However, my passion has always been photography. After reaching, Infosys I realizedthat this was not what my life was meant to be. I wanted to take control of my own life.That is why I have started my own venture. I know, I have started small; but at the endof the day it is a liberating feeling to work for oneself. Team: Inspiring! So according to you, what are the most important traits that an

Entrepreneur should develop?Kunal: Well, there aren’t a fix set of skills that one can point a finger on. Definitely,courage and appetite for failure is a must have. I remember, when I had initiallystarted, it took me months to find my first client. I kept chasing one client after the otheruntil I got my first break. There is a beautiful dialogue from the movie – ‘ShawshankRedemption’ – “Hope is a good thing; in fact the best of things”. You would see thatmost entrepreneurs would agree that Hope is the most important trait an entrepreneurmust possess. Also, entrepreneurs need to keep themselves in touch with the originamotive of starting the venture. This motivation is what drives me.

Team: How do you handle failures?Kunal: Well, it is natural that every failure brings disappointment. To be disappointedafter every failure is acceptable, but to be disheartened is a sin. I look at every failureas a learning opportunity. Team: How would you describe yourself as a person?

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Kunal: Extrovert, Team player and a person who is willing to try out new challenges inlife.

Team: Where do you draw your sense of security from? Aren’t you afraid that somedayyou might lose all this?

Kunal: (Laughs) Yes, I would be lying if I said that slight fear is not there. However, thehope of overcoming all barriers is much more than the fear. Moreover, how manypeople in the world have the pleasure of living their dream? I am living mine; that iswhere I draw my inspiration from. Team: What do you think is your biggest achievement as an entrepreneur?Kunal: My biggest achievement is yet to come. I have planned to expand my businessfor which I would need to employ a few people. The idea of providing employment topeople and help them climb the ladder of success, in my opinion, would be the biggest

achievement.

Team: One last question - Where do you go from here?Kunal: Well, as I told you, I am planning to expand my business to cover more events. am also planning to venture in fashion photography and many other plans; Lots ofplans and so little time. Team: We are really inspired by such a young entrepreneur. Talking to you has beenabsolutely inspiring. We wish you all the luck for you future endeavors. Thank you.

Kunal: It was a pleasure to talk to all of you. Thank you very much.

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Entrepreneurial Orientation Inventory Test

INSTRUCTIONS: This inventory contains 20 pair of statements. In each pair, you mayagree with one statement more than the other. You have 5 points to distribute betweenthe two statements. You may distribute the 5 points in any of the followingcombinations: 0- 5, 1- 4, 2- 3, 3- 2, 4- 1, 5- 0. If you agree slightly more with statement'a' than with statement 'b', then assign 3 points to 'a' and 2 points to 'b'. If you agreecompletely with 'a' but do not agree with 'b', assign 5 points to 'a' and 0 points to 'b'You cannot divide the 5 points equally between the two options; you have to chooseone option over the other.

S.No

Option

Statement Response

1 a. How successful an entrepreneur one will be depends on anumber of factors? One's capabilities may have little to dowith one's success.

_______

b. A capable entrepreneur can always shape his/her destiny. _______ 2 a. Entrepreneurs are born, not made. _______

b. It is possible for people to learn to become more enterprisingeven if they do not start out that way.

_______

3 a. Whether or not a salesperson will be able to sell his / her

product depends on how effective the competitors are.

_______

b. No matter how good the competitors are, an effectivesalesperson always will be able to sell his / her product.

_______

4 a. Capable entrepreneurs believe in planning their activities inadvance.

_______

b. There is no need for advance planning, because no matterhow enterprising one is, there always will be chance factorsthat influence success.

_______

5 a. Whether or not a person can become a successfulentrepreneur depends on social and economic conditions.

_______

b. Real entrepreneurs can always be successful, irrespective of social and economic conditions.

_______

6 a. Entrepreneurs fail because of their own lack of ability andperceptiveness.

_______

b. Entrepreneurs are bound to fail at least half the time, becausesuccess of failure depends on a number of factors beyond theircontrol.

_______

7 a. Entrepreneurs are often victims of forces they can neitherunderstand nor control.

_______

b. By taking an active part in economic, social and politicalaffairs, entrepreneurs can control events that effect theirbusinesses.

_______

8 a. Whether or not you get a business loan depends on how fairthe bank officer you deal with is.

_______

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Section - B Group - 4b. Whether or not you get a business loan depends on how good

your project plan is. _______

9 a. When purchasing raw materials or any other goods, it is wiseto collect as much information as possible from varioussources and then to make a final choice.

_______

b. There is no point in collecting a lot of information, in the longrun, the more you pay, the better the product is.

_______

10 a. Whether or not you profit in business depends on how lucky

you are.

_______

b. Whether or not you make profit in business depends on howcapable you are as an entrepreneur.

_______

11 a. Some types of people can never be successful asentrepreneurs.

_______

b. It is possible to develop entrepreneurial ability in differenttypes of people.

_______

12 a. Whether or not you will be a successful entrepreneur dependson the social environment into which you were born.

_______

b. People can become successful entrepreneurs with effort andcapability irrespective of the social strata from which theyoriginated.

_______

13 a. These days, people must depend at every point on the help,support, or mercy of others ( governments, bureaucracies,banks, etc.).

_______

b. It is possible to generate one own's income without dependingtoo much on the bureaucracy. What is required is a knack indealing with people.

_______

14 a. The market situation today is very unpredictable. Evenperceptive entrepreneurs falter quite often.

_______

b. When an entrepreneur's prediction of the market situation iswrong, that person can blame only himself or herself for failingto read the market correct.

_______

15 a. With effort, people can determine their own destinies. _______ b. There is no point in spending time planning or doing things to

change one's destiny. What is going to happen will happen.

_______

16 a. There are many events beyond the control of entrepreneurs. _______ b. Entrepreneurs are the creators of their own experiences. _______

17 a. No matter how hard a person works, he/she will achieve onlywhat is destined.

_______

b. The rewards one achieves depend solely on the effort onemakes.

_______

18 a. Organizational effectiveness can be achieved by employingcompetent and effective people.

_______

b. No matter how competent the employees in a company are, if socio-economic conditions are not good, the organization willhave problems.

_______

19 a. Leaving things to chance and letting time take care of them

helps a person to relax and enjoy life.

_______

b. Working for things always turns out better than leaving thingsto chance.

_______

20 a. The work of competent people always will be recognized. _______ b. No matter how competent one is, it is almost impossible to get

ahead in life without contacts. _______

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Analysis Sheet

Please tick on the response to which you have assigned the greater weightage.

Internal External1.b 1.a2.b 2.a

3.b 3.a4.a 4.b5.b 5.a6.a 6.b7.b 7.a8.b 8.a9.a 9.b10.b 10.a11.b 11.a12.b 12.a13.b 13.a

14.b 14.a15.a 15.b16.b 16.a17.b 17.a18.a 18.b19.b 19.a20.a 20.b

Total no of ticks:

Internal –

External -

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Key Drivers of Entrepreneurship

Based on our research during the project we narrowed down on four key drivers of

entrepreneurship:

1. Hope

Hope is a crucial aspect of Entrepreneurship. Hope is what drives you on when

the going gets tough. Example: J.K.Rowling – a single mother, her script was

rejected by twelve publishing houses. It was her hope of seeing her book

published that kept her going.

2. Dream

Like a leader has a vision, similarly an entrepreneur needs to have a dream.

Example: Dhirubhai Ambani – a petrol pump attendant dreamt of building an oil

refinery and ended up launching one of the world’s largest grass root refineries in

Jamnagar.

3. Motivation

Motivation is what keeps an Entrepreneur going when the chips are down. It

could also be the spark that ignited the entrepreneurial instinct. Example: SteveWozniak read a book in his childhood that got him interested towards science

and technology.

4. Action Orientation

If a person makes 100 decisions in a day as compared to a person who takes

only one decision, then the former is more action-oriented. By being action-

oriented if you make a bad decision you can always realize that it was bad and

change it. Thus by being action oriented, you can put a lot of things in motion andcan evaluate what is working and what is not. Example: Larry Page and Sergei

Brin, co-founders of Google, came up with the innovation-friendly office culture

namely the “Free-Food” and “20 Percent Time” programmes.

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References

"Developing Human Resources" - Leonard D. Goodstein and J. William

Pfeiffer Edition

“Pioneers in Entrepreneurship and Small Business Research” - Hans Landström

“Entrepreneur: Evaluation of the Concept and Characteristics” - Murthy, Madhu K

, September 2002.Sedme - Small Enterprises Development, Management and

Extension Journal

“The Paradox of Change: Within Or Without” - Sumana SHOM - Journal of

Cambridge Studies

http://www.businessweek.com/smallbiz/content/oct2007/sb20071025_812985.ht

m

http://www.smartcompany.com.au/start-up/do-birth-order-and-family-influence-

determine-entrepreneurship.html

http://humanlinks.ws/personal/entrepreneurial_orientation.htm

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entrepreneurship - the midas touch

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