Entrepreneurs are believed to have distinct characteristics, traits, and behaviors that motivate them to start a new venture, but are these factors specific to just entrepreneurs? Though there are many different definitions of who an entrepreneur is, he or she is a person who essentially takes risks by creating and running a new organization. There are two approaches, trait and behavioral, that help explain entrepreneurship and entrepreneurs themselves (Gartner, 1988, p. 12). According to Gartner,
In the trait approach the entrepreneur is assumed to be a particular personality type, a fixed state of existence, a describable species that one might find a picture of in a field guide, and the point of much entrepreneurship research has been to enumerate a set of characteristics describing this entity known as the entrepreneur (1988, p. 12).
The trait approach assists in determining the differences between entrepreneurs and non-entrepreneurs, as well as distinguishing between small business owners, managers, and entrepreneurs. A few of these traits include being risk-takers, self-motivated, creative, and determined, with other characteristics such as age, gender, education, and occupation. Though some may say the latter characteristics are vital to determining an entrepreneur, they do not necessarily prove whether an entrepreneur is going to be successful or not because they could describe anyone. The traits in this case are the most important qualifications of an entrepreneur because to start a new business, you must possess certain skills in order to be successful and persevere in the face of risks. The behavioral approach in turn coincides with the trait approach because it looks at the actions entrepreneurs take to create an organization. You may possess the right traits to go off on your own, but what actions you take to get you where you want to be determines your entrepreneurial ability. Gartner (1988, pp. 23-24) explains the difference between entrepreneurs and small business owners by the owner’s business intent, either for profit and growth or personal goals with an extension of personality. However, small business owners should be considered entrepreneurs because they are still creating a new business entity using the same tactics entrepreneurs use.
To help explain entrepreneurial principles, Sarasvathy (2006, pp. 2-9) uses effectual reasoning to thoroughly analyze the topic in question.
Effectual reasoning begins with a given set of means and allows goals to emerge contingently over time from the varied imagination and diverse aspirations of the founders and the people they interact with (Sarasvathy, 2006, p. 2).
Sarasvathy (2006, p. 3) also describes effectual reasoning as the inverse to causal reasoning, a term that is often taught for entrepreneurial processes, even though it does not apply to the unknowns of entrepreneurship. By the definition, effectual reasoning follows a process of going with the flow by using the resources you have readily available, along with creative means of getting resources through building partnerships. Plans are ever changing with this process as well because at any moment you can be thrown off your course of action and sent into a different one.
The affordable loss principle, the strategic partnership principle, and the leveraging contingencies principle further explain this more effective approach to causal reasoning (Sarasvathy, 2006, pp. 5-6). The affordable loss principle states that entrepreneurs tend to find the minimum ways to reach the market, and in some cases translates to reaching the market or intended customer base before having a physical product to get a better understanding of the feasibility and best methods to starting their entity. The strategic partnerships principle focuses on building partnerships to follow the affordable loss principle of keeping costs relatively low starting out. The leveraging contingencies principle focuses on profiting off the unexpected by using contingencies to benefit the starting venture. Gathering these principles together to summarize what makes entrepreneurs entrepreneurial by using effectual reasoning creates a perspective of how unstructured the topic is. Yet, we learn from this that causal reasoning is not always applicable, or not applicable at all, to entrepreneurship because there are many uncertainties that arise that can move the steps to creating a business around, or veto steps altogether with the right resources.
There are many entrepreneurial economists that define different static and dynamic theories on entrepreneurship. Cantillon was the first to recognize the role of an entrepreneur.
Cantillon’s entrepreneur is someone who engages in exchanges for profit; specifically, he exercises business judgments in the face of uncertainty (Hebert, Link, 1989, p. 42).
Cantillon noted one of the main themes that was discussed earlier: the topic of uncertainty. Entrepreneurs create a business in hopes of it being profitable, especially when things are unclear when venturing out on your own. Kirzner is another economist who noted a different theory about who an entrepreneur is. He believes that an entrepreneur is alert to profit opportunities, which provides another perspective to Cantillon’s view (Hebert, Link, 1989, p. 46). To be an entrepreneur, you must be alert to find the opportunity gap for the market you want to be in to ultimately be successful and profitable. All the perspectives in Hebert and Link’s article provide a different insight on what an entrepreneur is, but like Cantillon and Kirzner, they all can be connected to each other as someone who takes a risk in an uncertain economy in order to make a profit.
From these articles, entrepreneurs are gathered to be independent, risk-takers who create a new business in the face of uncertainty. Hebert and Link synthesize in their article that,
The entrepreneur is someone who specializes in taking responsibility for and making judgmental decisions that affect the location, form, and the use of goods, resources, or institutions (1989, p. 47).
Gartner (1988, p. 26) explains that entrepreneurship is the creation of new organizations and additionally, Sarasvathy (2006, p. 9) explains that entrepreneurs are entrepreneurial because they think effectually and believe that the future can be shaped by human action. Entrepreneurship is a very broad subject which includes many factors that influence each individual differently. Each factor shapes what we see every day in businesses and the people who run them, furthering our knowledge on this important topic.
Gartner, W. B. (1988). “Who is an entrepreneur?” is the wrong question. American journal of small business, 12(4), 11-32.
Hébert, R. F., & Link, A. N. (1989). In search of the meaning of entrepreneurship. Small business economics, 1(1), 39-49.
Sarasvathy, S. D. (2006). What makes entrepreneurs entrepreneurial?
