It’s a game not everyone can play, but more people
should be aware of this career alternative.
Most American businessmen have at some time in their
careers thought about starting their own company. Some have envisioned their
~wn enterprise as an avenue to personal wealth through large capital gains. To
them, there is a beautiful formula for financial success: (1) start a small
company, preferably in a glamour industry; (2) generate rapid growth in sales
and profits; (3) then sell out either to the public or to some large
acquisitive conglomerate.
Others have seen their own company as an opportunity to
do what they really wanted to do: to get close to a sport by developing a ski
area, or to reduce a new technology to practical use. Still others have sought
an escape from stultifying large-company constraints, politics, or career
impasses. In their dreams, their own venture would be a means to gain the top
position in a business.
Despite dreams, wishful thinking, and even plans, few
people actually take the step of trying to start a company. Why is this? Is
there a special breed of man which is particularly inclined to become an
entrepreneur? Are there special characteristics or conditions which stimulate
entrepreneurial activities? The basic questions we are asking here are classic
ones- Are entrepreneurs born or are they made? If they can be made, what are
the ingredients? I have reached the conclusions that, given a degree of
ambition and ability not uncommon to many individuals, certain kinds of
experiences and situational conditions—rather than personality or ego—are the
major determinants of whether or not an individual becomes an entrepreneur.
If we examine some of the attitudes in the subculture of
American businessmen we find that there are significant connotations to
starting a company as a career alternative. Almost everyone gets a glow—a
tingle—at the idea of being an entrepre
neur.
To men in their thirties and forties the idea of starting a company means “free
enterprise” and “Opportunity,” as reflected in Horatio Alger stories. In value
terms of the younger generation, starting a company is a way to “do your own
thing.” For such businessmen and for many business school students, starting a
successful
Patrick R. tiles, “Who are the entrepreneurs?” pp. 5—14,
MSU Bsiness Topics, Whiter 1974. Reprinted by permission of the publisher,
Division of Research. Graduate School of Business Administration, Michigan
State University. Patrick R. tiles is on the faculty of the Graduate School of
Business Administration, Harvard University. company is a very attractive idea,
yet only rarely do they seem to consider it a serious alternative. When a
possible opportunity presents itself, there is somehow too little time to
investigate it properly and too little time to determine whether or not the
idea really makes sense. Thus, it appears that most would-be entrepreneurs stop
before they get started. Unfortunately, there is very little information on
people who have had ideas about starting companies but never seriously pursued
them.
We might think that we already know a lot about the
entrepreneurs themselves— those who actually go ahead and start companies. Yet,
do we really? We find that there are people who think of entrepreneurs being
formed by school systems and child raising,’ by rejecting fathers,2 or by the
business environment.3 However, efforts to measure and predict entrepreneurial
potential are, at best, still in the development stages.4
Perhaps one of the best broad-based studies on
entrepreneurs was carried out by Orvis F. Collins and David G. Moore at
Michigan State University in 1964. Using a series of personal interviews and
psychological tests, they reached a number of rather unsettling conclusions
regarding people who start their own company:
Throughout the preceding analysis, obviously we have
been having difficulty deciding whether the entrepreneur is essentially a
“reject” of our organizational society who, instead of becoming a hobo,
criminal, or professor, makes his adjustment by starting his own business; or
whether he is a man who is positively attracted to succeed in it. We have,
perhaps without intention, regarded him as a reject.
Entrepreneurs are men who have failed in the traditional
and highly structured roles available to them in the society. In this . ...
entrepreneurs are not unique. What is unique about them is that they found an
outlet for their creativity by making out of an undifferen
tiated
mass of circumstances a creation uniquely their own: a business firm.
The men who travel the entrepreneurial way are, taken on
balance, not remarkably like-able people. This, too, is understandable. As any
one of them might say in thevernacular of the world of the entrepreneur, “Nice
guys don’t win.”’
Several small-sample studies at Harvard and MIT have
yielded results different from the Collins and Moore study.e Entrepreneurs were
found not to be failures. Instead “most of the founders had experienced a
generally higher than average level of success in their previous employment.
Several had established outstanding records of achievement.”7 These
entrepreneurs seemed more typical of the successful, hard-charging, young
business executive Or engineer than a reject figure.’
One possible explanation, of course, is that people in
Michigan are very different from those in New England. It might be more
helpful, however, if we categorized in some detail: (1) the kinds of business
which are used in studies of small business fatality rates and in the Collins
and Moore study, and (2) the kinds of business which might be started as
alternatives to pfofessional management or engineering careers. The survey-type
studies are comprehensive in that they essentially look at all companies which
are started withi.n a particular period of time. This includes a wide range of
business ventures: dry cleaners, retail shops, electronics manufacturers,
computer software firms, gas stations, and so forth. Each of these is used in
the computation of a wide range of statistics about the rise and demise of new
companies. There should he no reason to doubt the aggregate figures or the
results of in-depth studies made of these situations. The Collins and Moore
study looked at 10 manu facturing firms started between 1945 and 1958 in
Michigan but made no further distinctions as to the nature of the business,
size, or potential.
If we consider kinds of ventures which might be of
interest to a professional manager or an engineer, the vast majority of the
enterprises started each year (and, therefore, the bulk of those considered in
large, broad-based studies) would not be included. A dry cleaning establishment
or a small metal fabricating shop is not the basis for the dreams of these
people. From their perspective (and. therefore the perspective of this article),
we should label this subcategory of small business as marginal firms. That
leaves us with the task of considering the kinds of venture situations which
are potentially attractive career alternatives. The first, which I have labeled
the high-potential venture, is the company which “is started with the intention
that the venture grow rapidly in sales and profits and become a large
corporation.’” In its planning stage the high-potential venture is the extreme
of personal economic opportunity, the entrepreneur’s big dream: such as
Polaroid, Digital Equipment, Scientific Data System, Cartridge Television,
Viatron, and so on.
Another type of enterprise, less obvious than the
high-potential venture, also holds a strong interest for many would-be
entrepreneurs. This type of venture we might call the attractive small company.
In contrast to the high-potential venture, the attractive small company is not
intended to become a large corporation, probably will never have a public
market for its stock, and will not be attractive to most venture capital
investors. However, in contrast to the marginal firms, attractive small
companies can provide salaries of $40,000 to $80,000 per year, perquisites
(company car, country club memberships, travel, and so forth) to its owner/managers,
and often flexibility in life-style such as working hours, kinds of projects
and tasks pursued, or geographical location. In this subcategory we find such
businesses as consulting and other service firms and some specialized
manufacturers.
Both the high-potential venture and the attractive small
company are interesting beyond the scope of the benefits they may provide to
their founder/owners. In the high-potential venture we find the genesis of the
major corporations of the future and, therefore, the source of a growing number
of jobs and other contributions to the economy. The attractive small companies
provide less spectacular but stable inputs of a similar nature. Both of these
kinds of companies must gain and maintain their position by providing
competitive discomfort to the existing corporate giants through innovation~
flexibility, and efficiency.
The marginal firms, on the other hand, provide support
for their owners! employers but frequently at a tower level than might be
obtained by employment if they could or would work elsewhere. However, these
people are not likely to seek employment elsewhere because of their
difficulties in functioning in larger and more structured organizations. “~
Without questio’t, some of the businessmen and engineers
who start high-potential ventures or attractive small companies are compulsive
entrepreneurs. They cannot function effectively in a large organization. They
must be their own boss and they may have known this all their lives. It may
seem as if they could have behaved in no other way. But what about the others
who started companies? What about the entrepreneurs who ate bashally
well-adjusted people ~nd who had given little previous thought, if any, to the idea of their own
company? flow did these people happen to become entrepreneurs although most
were already successful in the pursuit of a more conventional career? What
factors play a leading role in determining who becomes an entrepreneur? Which
factors might be largely fortuitous and which might be controlled by the
individual?
A BASIC PREREQUISITE : ACHIEVEMENT
MOTIVATION
Not all people are inclined to take on significantly
more than they have to. A high-potential venture or an attractive small company
is usually recognized as requiring a tremendous amount of determined effort and
commitment. These kinds of activties are not attempted unless an individual is
willing to expend more effort and energy than would be required in a more
conventional career.
People
high in achievement motivation are the people who strive to make things
happen—in the laboratory, on the production floor, in the sales office, in the
classroom.” Obviously this factor alone is insufficient to determine who starts
companies and who does not. But it is a beginning. People without this kind of
orientation are unresponsive to the other influences which might encourage
starting a venture. However, people with achievement motivation together with
other influencing factors may become entrepreneurs.
Achievement motivation can be developed. It would appear
unlikely, however, that someone would try to develop achievement motivation in
himself in order to start a high-potential venture or an attractive small
company. One would expect that it would take a highly achievement-motivated
person to want to start either of these kinds of enterprises in the first
place.
A DiSQUALIFYING INFLUENCE:
SOCIAL SELF-IMAGE
The majority of people trying to do exceptionally well
in their careers never seriously consider starting a company. Even among the
professional managers or career businessmen the number is small. This is not to
say that many of these people would not gladly be successful entrepreneurs in
their own companies. They are unwilling, however, to take what they see as a
backward or downward step necessary to achieve that success.
An acquaintance of the author’s, a Yale graduate, has
described the effect of his college experience on his own thinking about his
career: all came clear one night when I was arguing and describing how Charlie
had not been able to go to college, but instead after working in a restaurant
had bought a second-hand dump -truck. That’s when it dawned on me that because
I went to college I could never buy a -second-hand dump truck, not even a brand
new one with someone else to drive it. When I ran across an old friend, I could
not afford to explain that I was the owner of a dump truck. No, I was “with”
the ABC Corporation. Not necessary to explain that they are the largest producers of this and that in the world. I
was “with” them, and my friend was ‘with” -someone just like them.
Because of recent increasing sentiments favoring
personal independence and relevance, we might expect to find in the future a
greater general public acceptance of entrepreneurial activities and, therefore,
to discover less and less of a conflict between this kind of a carieer and a
person’s social self-image. in this sense, it may be becoming easier for
~orneone to decide to strike out on his own than it has been in the past.
Perhaps we shall come to the point where becoming an entrepreneur is ecognized
as a socially legitimate, and even attractive, career alternative.
INFLUENCE ON ENTREPRENEURIAL CAREERS
For the person who has achievement motivation and whose
social self-image is not in conflict with starting a company, there are two
kinds of conditions which become critical: (1) how ready he sees himself for
undertaking such a venture, and (2) how many distractions or obligations he
sees holding him back. The reader will note that what an individual does
depends upon how he perceives a situation rather than upon what the situation
actually is. This is particularly critical in considering a person’s readiness
or his restraints because there is no way for anyone to make direct, objective
measurements of these characteristics. Instead, a personal assessment of
readiness or restraints is going to be a combination of knowledge, insight,
judgment, and personal values. Readiness in terms of his decision to initiate a
company and to try to run it successfully, a person’s own assessment of how
ready he is probably is a good approximation of how ready he really is. One
would not likely find a runner expecting to run a four-minute mile without
having some objectively valid reasons behind those expectations.
Similarly, an individual who believes that he is ready
to start a company is probably reaching that decision from some background of
experience, exposure, special skills. and industry knowledge. This is not to
say that some people do not try to initiate businesses when they are totally
unprepared. it would imply, however, that in most of such instances the
individual himself knows very well that the odds are against his being able to
make a go of it. It might be useful to think of an individual’s readiness in
terms of levels of specific and general self-confidence. Specific
self-confidence in this context represents an individual’s feeling of mastery
over the kinds of tasks and problems he would expect to encounter in starting a
company and making it successful. General self-confidence would be his feeling
of well-being and his universal assurance that he can accomplish things.
What people learn through a variety of business and
related experience accumulates over time. Most people learn relatively more and
learn relatively more rapidly early in their careers when much of what they do
and see is new to them. And although the relative rate of learning may diminish
over time, the cumulative effect is an increasingly competent individual. The
evolution of a person’s readiness as reflected in his specific self-confidence
to master various elements of a venture is depicted graphically in Fig. 1.
General self-confidence, which is necessary for someone to want to try
something new, is an elusive idea. Most people can identify in their own lives
those periods when they were confident and up for doing big, new things. They
can also recall other times when they were anxious, and uncertain-—unwilling to
get away from the sure and the known. Given the high degree of uncertainty for most
people in starting a company, a high level of general self-confidence is
necessary for them to be willing to try.
Restrains
Perhaps the most effective restraint on someone who
otherwise might start a company is his continuing succes and satisfaction in
puirsing his present job. Why should anyone want to change if thimgs are going
well ?Especially with the passage of time, increasing seniority for such people
means a larger salary, greater responsibility, and greater benefits. In
addition, an individual develops a personal power base within an organization :
key knowledge and skills, confidence and loyalty of associates, and so forth,
which enable him to assert himself and to be effective. At some point, even in
the face of a grave disappointment or disenchantment with the company, it
becomes almost prohibitively “expensive” to resign and pursue another career
direction. requirement upon the husband until the children go away to school.
As small children begin to lose physical dependence upon their mothers, the
role of the father increase in both depth and scope. In the wisdom of everyday
life, “This is the time when the children need a father.”
Precipitating Events
For some people, the combination of circumstances is
such that they never attain sufficient capacityt to start a company. They never
reach a free choice period. Their other commitments become too large before
they reach a point where they could strike
- Dissatisfaction
- Identifying a new venture opportunity
- Encouragement and support
- What about Risk ?
- covers a multitude
- Financial risk
- Career risk
- Family risk
- The physic risk
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