Miranda Beal
Spears School of Business, Oklahoma State University
EEE 2083-30940
Dr. Steve Trost
January 23, 2023
This paper depicts three articles that explain and define entrepreneurs and entrepreneurship. Each article gives a slightly different answer to multiple questions, such as, who is an entrepreneur and what makes them different? The behaviors and tendencies of an entrepreneur should be investigated. However, most researchers ask what qualities they have. The answers they get are correct, but they do not help us define an entrepreneur to its fullest extent. They interact, solve problems, and create differently than others.
Extensive research has been conducted in order to properly define what an entrepreneur is, how they behave, and if entrepreneurship can be taught. Entrepreneurs have specific habits and practices that set them apart. They reason through problems differently, when most would see bumps in the road, entrepreneurs will see steppingstones to achieve something greater. In her research paper, Saras Sarasvathy, defined an entrepreneur’s way of thinking as “effectual reasoning.” She goes on to explain the difference in this type of reasoning and an alternative. Effectual reasoning is vastly different from the casual rationality, which is what most programs are teaching their students.
Casual reasoning is based on a fixed goal and a specific set of means that will guide you to find the ideal course of action to achieve that goal. For example, a contractor who is building “cookie-cutter” homes is given an exact layout, budget, and plan to follow. Each step and piece required to complete the home is written down and explained thoroughly. The contractor must simply follow the instructions that have been provided. Casual reasoning is still creative thinking, but it is not necessarily considered critical thinking.
Effectual reasoning is a bit more complicated. There is not a specific goal in mind. Rather, a set of means is given, and goals are formed after the fact. To continue the example of building homes, effectual reasoning is more closely related to an independent contractor. They would still be given a budget and some direction; however, it is up to them to design and build a home. The contractor is able to be more creative and use their critical thinking skills to complete the job.
The process, principles, and logic look much different for effectual reasoning entrepreneurs than it does for casual rationality entrepreneurs. Casual reasoners plan things very carefully and take things step by step. Effectual reasoning has much less structure and rules. “Plans are made and unmade and revised and recast through action and interaction with others on a daily basis.” (Sarasvathy, 2006, p. 3). Entrepreneurs are creative and do not stick to one way of solving a problem or achieving to the goals they have set.
There are three principles that differentiate causal reasoning from effectual. First, the affordable loss principle teaches entrepreneurs to secure their market with minimal resources. For instance, using the least amount of money, time, and effort as possible. Instead of researching the market you plan to reach, go out and converse with people. Try to make sales. Figure out who would be interested in your product or service, rather than assuming. This will require a bit more effort, but it will cut down the amount of time spent researching the potential target market. Second, the strategic partnerships principle is the idea of making connections instead of doing a competitive analysis. By building partnerships from the beginning, it is easier to gather information about the market and your competitors before you have invested an abundance of time and money into the company. Entrepreneurs are then able to expand their target market simply by having conversations and marketing their product or service. Lastly, is the leveraging contingencies principle. Sarasvathy (2006, p. 6), explains it as the ability to make unexpected events and discoveries profitable. Many large companies stemmed from unforeseen partnerships.
The concept that we can control what will happen in the future, but we do not need to try and predict it is the logic associated with effectual reasoning. The example that Sarasvathy uses is a probability model. She explains that a bowl will have 10 red balls and 10 green balls. Red represents winning $50. However, green would mean nothing is won. Giving the person a 50/50 chance of winning. Instead of hoping that a red ball is chosen, the entrepreneur would make partnerships that will either turn green into red, collect more red balls to add to the bowl, or make green a profitable option as well. An entrepreneur that uses effectual reasoning changes the game; they generally try to make the situation work in their favor.
The question “Who is an entrepreneur?” does not necessarily give us clear answer. It allows us to find some examples of different types of entrepreneurs, however, we should be asking “How does an entrepreneur …?” “Why does an entrepreneur …?” Entrepreneurs exhibit many behaviors that other business owners and corporate workers do not possess. “This person, this entrepreneur, must have special qualities: … (from Say) judgement, perseverance, and a knowledge of the world as well of business.” (Say, 1816, p. 3. as cited in Gartner, 1988, p. 11). Gartner goes on to explain that both successful and unsuccessful leaders have many of these behaviors and characteristics. Extensive research has been done to determine that we must find out how they act and what they do instead of who and what they are. Rather than figuring out where they are from, their past jobs, or what their degree is in, we should find out what sets them apart from small business owners and corporate workers.
The next question that must be answered is “What do people do to create organizations or businesses?” This will not give us traits of an entrepreneur, instead it will give us actions. We are able to get a glimpse of how they respond to hardships and successes. To get this answer we must find out; How do they solve problems? How do they interact with others? How did they achieve this goal? What kinds of connections do they make? Their ability to turn valleys into mountaintops is vital to understanding what makes an entrepreneur successful. The answers to these allow us to determine their thought processes and behaviors. Those are the things we need to be teaching students.
The terms entrepreneur and entrepreneurship have been used for centuries; however, it was not until more recently that researchers have tried to define it properly. Entrepreneur is a fairly broad category. Innovator, decision maker, leader, manager, owner, contractor, organizer, and so many more titles all fall under the umbrella of entrepreneurship. Hebert and Link further explain that the personality is not what makes an entrepreneur, it is the practices and behavior they exemplify. T. W. Schultz is quoted to have said “the bearing of risk is not a unique attribute of entrepreneurs. Whereas entrepreneurs assume risk, there are also people who are not entrepreneurs who assume risk.” (Schultz, 1980, p. 441. as quoted in Hebert, Link, 1989, p. 8). Entrepreneurs are not a special kind of human. They simply see things and work through processes differently.
Entrepreneurs and entrepreneurship are not easily defined, even so, the answers to these questions give us a new depth of understanding. How they interact and solve problems is what sets them apart. Their personality traits are important things to consider, but their actions should be investigated more. How they reason through problems that may arise teaches us to be patient and creative. Each entrepreneur is different, and it is not simple to sum up everything that makes them successful and interesting.
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?
Schultz, Theodore W., 1980 ‘Investment in Entrepreneurial Ability’, Scandinavian Journal of Economics 82, 437-448.
