The defining characteristics of entrepreneurs have long been debated by experts of the subject. Some authors assert that all entrepreneurs share risk-taking and creative personality traits (Hebert and Link, 1989), while others propose that it is the actions entrepreneurs take that define them (Gartner, 1988). While each of these arguments have their own deductions about the perceived requirements for an entrepreneur, they each have their own merits and must all be considered equally in an individual's understanding of entrepreneurship.
The majority of people are able to name someone that they consider an entrepreneur, but few are able to define what causes them to consider the individual as such. One may assert, for example, that Bill Gates is an entrepreneur who reshaped the world of personal computers, but would find difficulty in explaining why he is to be considered an entrepreneur.
Saras Sarasvathy argues in her 2006 essay “What makes entrepreneurs entrepreneurial?” that it is effectual reasoning that sets entrepreneurs apart from the rest of society (Sarasvathy, 2006). The main difference between causal reasoning (that is most common in people) and effectual reasoning (common in entrepreneurs) is that causal reasoning begins with an end goal in mind, whereas effectual reasoning begins with the resources available and seeks to produce success (Sarasvathy, 2006).
That is to say, causal reasoning begins with a destination, and requires skill to find the shortest, most efficient path to take to reach the end. To extend the Bill Gates analogy, causal reasoning would be useful if he set out to reshape the personal computer industry and used his resources to further his advances to this goal. Effectual reasoning, however, would be the use of Bill Gates’ personal knowledge, experiences, and connections to further himself in a business career, without a destination in mind (Sarasvathy, 2006).
Sarasvathy contends that effectual reasoning provides greater possibilities for success by creating multiple avenues for an entrepreneur to use their resources for success, as opposed to the path that would be created by causal reasoning.
“A chef who is given a specific menu and has only to pick out his or her favorite recipes for the items on the menu, shop for ingredients and cook the meal in their own well-equipped kitchens is an example of causal reasoning. An example of effectual reasoning would involve a chef who is not given a menu in advance, and is escorted to a strange kitchen where he or she has to explore the cupboards for unspecified ingredients and cook a meal with them. While both causal and effectual reasoning call for domain-specific skills and training, effectual reasoning demands something more - imagination, spontaneity, risk-taking, and salesmanship (Sarasvathy, 2006, pg. 3).”
By highlighting the differences between causal and effectual reasoning in this example, Sarasvathy showcases the abilities of those who practice effectual reasoning in adapting quickly to uncertain situations to create success in their field. It is true that causal reasoning requires skill, dedication, and knowledge of your field, but effectual reasoning requires an additional ability to alter their plans to fit the situation and resources available (Sarasvathy, 2006).
Beyond the characteristics that define an entrepreneur, it is equally debatable as to what effect the entrepreneur has on the world around them. While some effects are obvious, such as a new product, process, or other asset, some impacts may be less visible. In their 1989 publication Small business economics, Hebert and Link argue that an entrepreneur is:
“someone who specializes in taking responsibility for and making judgemental decisions that affect the location, form, and the use of goods, resources, or institutions (Hebert and Link, 1989, pg. 47).”
This definition comes from a synthesis of many different scholar’s opinions of the entrepreneurial effects that an individual can have on a local economy.
Hebert and Link avow that as economic studies advance, they continually downplay the active importance of the entrepreneur in economic analysis. They further go on to say that the debate of whether entrepreneurs inspire change or are reactionary forces in the economy is irrelevant, and that it is the ability to perceive opportunities, the courage to take action, and the ability to respond effectively to a given situation is what defines an entrepreneur (Hebert and Link, 1989).
This action often has the ability to change the behavior of an economy. Joseph Schumpeter argued that the entrepreneur is the initiating factor of economic development (Schumpeter, 1934), whereas Richard Cantillon believed that anyone who participated in an exchange for profit could be considered an entrepreneur (Cantillon, 1931). Finally, T. W. Schultz believed that entrepreneurs could be anyone who could effectively react to disequilibria in society. Schultz further investigated the link between an individual’s education and their ability to recognize and respond to disequilibria (Schultz, 1975). In this way, Schultz aligns closest with Hebert and Link in their view of definitive characteristics of entrepreneurs through their interaction with the economy.
In his 1988 essay titled “Who Is an Entrepreneur?” Is the Wrong Question, William B. Gartner seeks to explain what actions can be considered purely entrepreneurial. While many would consider Steve Jobs, Bill Gates, and Jeff Bezos to be entrepreneurs when they founded their respective companies, could they still be considered entrepreneurs today? Gartner explores the difference between entrepreneur and business owner through the traits, approaches, and actions that entrepreneurs showcase throughout their career.
Through a critique of Carland, Hoy, Boulton, and Carland, which was published in 1984, Gartner begins by exploring the perceived differences between entrepreneurs and small business owners. Carland, et al. have determined that after an indeterminate amount of time, an entrepreneur is no longer truly displaying the risk-taking, groundbreaking innovation that is expected of them, and is instead maintaining a business that was born from their innovation. Carland, et al. distinguish the entrepreneur from the business owner as such: an entrepreneur establishes and manages a business for profit, and is principally characterized by innovative behavior and strategic practices, whereas a small business owner can be considered as an individual who establishes and manages a business in order to further their own personal goals (Carland, Hoy, Boulton, and Carland, 1984).
Gartner disagrees with Carland, et al. in these definitions, because the ambiguous wording can allow for great overlap in the categorization of an individual as both an entrepreneur and a small business owner. Carland himself considers entrepreneurship as the creation of new organizations (Gartner, 1988, pg. 26), but stresses that he does not offer this as a definition, but rather as a new viewpoint of entrepreneurship by which to evaluate the field. To conclude his thoughts, Gartner offers the following ideas:
“The creation of an organization is a very complicated and intricate process, influenced by many factors and influencing us even as we look at it. The entrepreneur is not a fixed state of existence, rather entrepreneurship is a role that individuals undertake to create organizations (Gartner, 1988, pg. 28).”
In this passage, Gartner clarifies that, in his belief, an entrepreneurship cannot be characterized by a person's individual traits, beliefs, or resources, but rather by the role that they take upon themselves during the formation of an organization.
None of the pieces referenced above sought to provide an authoritative answer as to who or what entrepreneurship could be characterized as, because the word itself represents an abstract drive to innovate the world around one’s self. Sarasvathy aimed to determine a difference in the thought process of entrepreneurs from the average person, Hebert and Link to better understand the relationship between the entrepreneur and the society they exist in, and Gartner to explain the roles that could transform anyone into an entrepreneur, given the right situation and resources.
Though none of these arguments provide a final definition of entrepreneurship, they each serve to further one’s understanding of the subject in a unique way. It is unlikely to find a group of experts that would define entrepreneurship in the same way, as the economic, social, psychological, educational, and personal factors that inform an entrepreneur’s decisions are too many to enumerate and truly study.
The word entrepreneur can have one thousand meanings depending on who uses it, who they are describing, and the setting of the actions in question.
Cantillon, Richard, 1931, Essai sur la nature du commerce en general, edited and translated by H. Higgs, London: Macmillan.
Carland, J. W., Hoy, F.. Boulton. W. R., & Carland, J. C. (1984). Differentiating entrepreneurs from small business owners: A conceptualization. Academy of Management Review. 9(2), 354-359.
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., 1975, 'The Value of the Ability to Deal with Disequilibria', Journal of Economic Literature 13, 827-846.
Schumpeter, J. A. (1934). The Theory of Economic Development, translated by R. Opie from the 2nd German edition [1926]. Cambridge: Harvard University Press.
