Are Entrepreneur Born or Made?

A MHCE Project

Prepared by

Jeyachandran Thavamtoo

0017MRMMRM1118

Master of Business Administration

University of Wales Trinity Saint (UK)

10 January 2019
1.0 Executive Summary - 185

2.0 Table of Content

3.0 List Of Figures/Tables/Abbreviations

4.0 Introduction - 297

5.0 Literature Review

5.1 History - 311

5.2 Modern Entrepreneurship - 365

6.0 Critical Analysis

7.0 Conclusion

8.0 References

9.0 Bibliography

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1.0 Executive Summary

The purpose on this assignment is to explore and analyses whether entrepreneur are born or

made. To further analyses on the question, is it possible to learn how to build successful

companies and employ thousands of people? Or, are epic entrepreneur like Mark Zuckerberg,

Steve Job, Oprah Winfrey and Andrew Carnegie born to be successful?

The research question also covers the function and definition of entrepreneur, the characteristic

and quality trait of a successful entrepreneur, academic disciplines of entrepreneurship and finally

ideas & opportunity for an entrepreneurship,

Philomena Lartey, 2007, there is continuous debate on the definition of entrepreneurship and

who the entrepreneur is, although there have been several studies on the subject (Low, 2001; Bull

and Willard, 1993), which are often very confusing (Hull et al., 1980, Wortman, 1987).

The debate on whether entrepreneurs are born or made is ongoing. Some researchers are of the

view that entrepreneurs are born and not made (Cohen, 1980); others think that entrepreneurs are

made and not born (Burns and Dewhurst, 1993; Kent, 1984) whilst others think that

entrepreneurs are both born and made (Bolton and Thompson, 2005).

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4.0 Introduction

Entrepreneurs have been found to be important to the entrepreneurship process although other

factors, such as the social constitution and the role of government, cannot be underestimated.

Entrepreneurship is viewed as a „major driver of innovation, competitiveness and growth‟

(European Commission, 2004, p.3). It is therefore not surprising that several researchers have

indicated the immense role entrepreneurship plays in the creation of wealth and the economic

development of business units in particular and society as a whole (Schumpeter, 1934;

McClelland and Winter, 1969; Keeble et al., 1990; Audretsch and Fritsch, 1991).

Report of the Secretary-General UN (2016), recognized the important contribution of

Entrepreneurship makes to sustainable development by creating jobs and driving economic

growth and innovation, improving social conditions and addressing environmental challenges.

Entrepreneurship contributes to economic growth and diversification. Entrepreneurship drives

structural transformation and industrialization leading to inclusive and sustainable socioeconomic

development. United Nation, Entrepreneurship for Development (2016).

Entrepreneurship contributes to economic growth and diversification. It drives structural

transformation and industrialization leading to inclusive and sustainable socioeconomic

development. As entrepreneurs start and grow their firms, they transform the economy and drive

broader outcomes contributing to the global sustainable development agenda. United Nation,

(2016).

Entrepreneurship also play vital role in reducing country poverty level in developing countries.

Riznaldi Akbar, (2016). Goel and Rishi (2012) found that entrepreneur help poverty alleviation

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program in India. The authors argued that all stakeholder of government, entrepreneur and

citizens have to sit together to eradicate country’s poverty level.

Entrepreneur are also effective instrument for job creation in a country (Malchow-Moller,et al,

2011; Syedet al.,2012: Mensah & Benedict, 2010) Malchow-Moller et al(20111)analyzed the

importance of entrepreneur in term of job creation and wage growth in Danish economy. The

studies suggest that entrepreneur establishments are significantly responsible for gross job

creation in Danish economy.

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5.0 Literature Review

5.1 History

The term entrepreneurship is derived from a French word ‘Entreprendre’ which means ‘to

undertake’, ‘to pursue opportunities’, or ‘to fulfill needs and wants through innovation and

starring businesses. The word first appeared in French dictionary in 1723.

In early 16th century it was applied in military expedition. In17th century the word entrepreneur

was used for civil engineering activities such as construction and fortification. The word

entrepreneur was applied to business for first time in 18th century to designate a dealer who buys

and sells goods at uncertain prices. M.C Garg, Entrepreneur & Entrepreneurship,

Source: The Economist ;

Catch the wave - The long cycles of industrial innovation are becoming shorter (Aug 2014)

Long-waves (cycles) were first noted and discussed by a researcher from Russia N. Kondratieff.

His research was further continued by the Austrian economist J Schumpeter. In Schumpeter view,

each of these long business cycles was unique, driven by entirely different clusters of industries.

Typically, a long upswing in a cycle started when a new set of innovations came into general

use—as happened with water power, textiles and iron in the late 18th century; steam, rail and

steel in the mid-19th century; and electricity, chemicals and the internal-combustion engine at the

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turn of the 20th century. In turn, each upswing stimulated investment and an expansion of the

economy. These long booms eventually petered out as the technologies matured and returns to

investors declined with the dwindling number of opportunities. After a period of much slower

expansion came the inevitable decline—only to be followed by a wave of fresh innovations

which destroyed the old way of doing things and created the conditions for a new upswing. The

entrepreneur's role, as Schumpeter saw it, was to act as a ferment in this process of creative

destruction, allowing the economy to renew itself and bound onwards and upwards again.

5.2 Modern Entrepreneurship

The Robert D. Hisrich and Michael P. Peters (1998) said, “Entrepreneurship is the process of

creating something new with value by devoting the necessary time and effort, assuming the

accompanying financial, psychic and social risks and receiving the resulting rewards of monetary

and personal satisfaction and independence.”

An entrepreneur is the person who sees a problem in the world and immediately focuses on

creating the solution. They’re the leaders that strike out on their own to improve society. Whether

they’re creating jobs or a new product, they constantly act to ensure world progress. In the

process of understanding what is entrepreneurship, let’s look at why entrepreneurs are important

in society.

Without entrepreneurs, jobs wouldn’t exist. Entrepreneurs take on the risk to employ themselves.

Their ambition to continue their business’ growth eventually leads to the creation of new jobs. As

their business continues to grow, even more jobs are created. Thus, lowering unemployment rates

while helping people feed their families.

Entrepreneurs dream big so naturally some of their ideas will make worldwide change. They

might create a new product that solves a burning problem or take on the challenge to explore

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something never explored before. Many believe in improving the world with their products, ideas

or businesses.

While some have this notion of the rich being evil and greedy, they often do more for the greater

good than the average person. They make more money and thus pay more in taxes which helps

fund social services. Entrepreneurs are some of the biggest donors to charities and nonprofits for

various causes. Some seek to invest their money in creating solutions to help poorer communities

have access to things we take for granted like clean drinking water and good health care.

Figure 1

Source: What makes entrepreneurs entrepreneurial? Saras D. Sarasvathy, 2001

Saras D stated, Entrepreneurs are entrepreneurial, as differentiated from managerial or strategic,

because they think effectually; they believe in a yet-to-be-made future that can substantially be

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shaped by human action; and they realize that to the extent that this human action can control the

future, they need not expend energies trying to predict it. In fact, to the extent that the future is

shaped by human action, it is not much use trying to predict it – it is much more useful to

understand and work with the people who are engaged in the decisions and actions that bring it

into existence.

Today, entrepreneurs are the lifeblood of economies all over the world. Even in command

economies like China, entrepreneurs are valued for their contributions to the economy and

encouraged to innovate to compete with companies around the world. The global economy –

combined with modern infrastructure and communications – has introduced a new age of

competition to the world of entrepreneurship.

5.3 Function of entrepreneur

According to the European Commission (2004), entrepreneurship refers to the process and

mindset required to generate and develop economic undertaking, combining creativity or

innovation, and risk-taking and appropriate management practices within an existing or new

organization. Entrepreneurship is therefore regarded as a process and the individual or group who

sets this „process in motion and directs the early stages of a new venture‟ (Bird, 1989, p.1) is

regarded as an entrepreneur.

5.3.1 Decision Making:

The primary task of an entrepreneur is to decide the policy of production. An entrepreneur is to

determine what to produce, how much to produce, how to produce, where to produce, how to sell
and’ so forth. Moreover, he is to decide the scale of production and the proportion in which he
combines the different factors he employs. In brief, he is to make vital business decisions relating
to the purchase of productive factors and to the sale of the finished goods or services.

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5.3.2 Management Control:

Earlier writers used to consider the management control one of the chief functions of the

entrepreneur. Management and control of the business are conducted by the entrepreneur himself.

So, the latter must possess a high degree of management ability to select the right type of persons

to work with him. But, the importance of this function has declined, as business nowadays is

managed more and more by paid managers.

5.3.3 Division of Income:

The next major function of the entrepreneur is to make necessary arrangement for the division of

total income among the different factors of production employed by him. Even if there is a loss in

the business, he is to pay rent, interest, wages and other contractual incomes out of the realised

sale proceeds.

5.3.4 Risk-Taking and Uncertainty-Bearing:

Risk-taking is perhaps the most important function of an entrepreneur. Modern production is very

risky as an entrepreneur is required to produce goods or services in anticipation of their future

demand. Broadly, there are two kinds of risk which he has to face. Firstly, there are some risks,

such as risks of fire, loss of goods in transit, theft, etc., which can be insured against. These are

known as measurable and insurable risks. Secondly, some risks, however, cannot be insured

against because their probability cannot be calculated accurately. These constitute what is called

uncertainty (e.g., competitive risk, technical risk, etc.). The entrepreneur undertakes both these

risks in production.

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5.3.5 Innovation:

Another distinguishing function of the entrepreneur, as emphasized by Schumpeter, is to make

frequent inventions of new products, new techniques and discovering new markets to improve his

competitive position, and to increase earnings.

The above description indicates the supreme position of the entrepreneur in an organization. This

is particularly true in the capitalistic or even mixed economy which is based on the price-profit

system. In the socialistic economy, the state becomes the entrepreneur; the scope of private

entrepreneur is extremely limited in such an economy. It is to be noted that the importance of the

entrepreneur has been declining with the growth of joint stock business and state-undertakings,

this is since “risk is borne by the shareholders and the day-by- day control of the business is

generally in the hands of salaried managers or managing directors”.

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5.4 Characteristic of Entrepreneur

Entrepreneurship culture implies a set of values, norms and traits that are conducive to the growth

of entrepreneurship as below;

I. Entrepreneurs are action oriented, highly motivated individuals who takes risks to

achieve goals.

II. Entrepreneurs will have unwavering determination and commitment. They are

creative and result-oriented. They work hard in return for personal and financial

rewards.

III. Entrepreneur accepts responsibilities with enthusiasm and endurance.

IV. Entrepreneur have self-confidence, they are dedicated, setting self-determined goals

and markets for their ideas responding to existing market.

V. Entrepreneurs are thinkers and doers, planners and workers.

VI. Entrepreneurs can for see the future, as a salesman’s persuasiveness, a financial talent

for manipulating funds, as auditor’s precision etc.

VII. Entrepreneur depends on the intelligence, imagination and strength of purpose of the

individual.

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1.1 RESEARCH CONTEXT

The relevance of these arguments to

policymakers will determine the kind of structures that will be established in order

to develop entrepreneurial skills and the growth of businesses in a country. If

policymakers share the view that entrepreneurs are made, efforts will be geared

towards enacting polices that will support the training of people to become

entrepreneurs whereas less attention will be accorded if it is believed that

entrepreneurs are born. The basic question of whether entrepreneurs are born or

made has proved to be relevant to policymakers in the developed world and is

evident in the abundant literature available on this question.

There is concentrated effort by governments and academics the world over, to

encourage and create entrepreneurs (Leo, 2001; Hisrich, 1990). Successive

Ghanaian governments have been encountering varying degrees of success and

with resulting implementation problems in their efforts to promote

entrepreneurship in the country (Buame, 2001).

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1.3 CHAPTER OUTLINE

This research comprises five chapters. Chapter 2 focuses on a critical review and

evaluation of Western academic literature to identify key theories and ideas

(Saunders et al., 2007) on entrepreneurship, the entrepreneur and policy. This

serves as the basis for tackling the research problem and also „placing the

research in a historical context‟ (Hart, 1998, p.37). It offers the reader coherent

knowledge on the characteristics of entrepreneurs using personality models and

also examines whether entrepreneurs are born or made. Finally, it explains the

basis upon which entrepreneurship policies are enacted. The main themes that

emerge from the literature review form the basis for a discussion of the primary

and secondary data gathered.

Chapter 3 focuses on the research methodology employed. It describes the

design and tactics (Saunders et al., 2007) adopted for this study. The research

onion (Saunders et al., 2007) framework has been used to explain the processes

of the study. The chapter throws light on the kind of research philosophy, strategy

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and methodologies that are employed. Chapter 4 presents a discussion and

evaluation of the findings of the study. It defines who the entrepreneur is within

the context of this research. Furthermore, it analyses the characteristics of

entrepreneurs and the question of whether entrepreneurs are born or made from

the Ghanaian perspective, and explores whether this question is relevant to

policymakers in Ghana. It finally evaluates the nature of entrepreneurial policies in

Ghana and the basis under which these policies are designed.

The final chapter (Chapter 5) presents the conclusions drawn by the author on the

basis of the key research findings and issues of the study. It also provides a set of

recommendations for policymakers in Ghana and other developing countries.

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Literature Review

Economic Theories

Economic entrepreneurship theories date back to the first half of the 1700s with the work of

Richard Cantillon, who introduced the idea of entrepreneurs as risk takers. The classic,

neoclassical and Austrian Market process schools of thought all pose explanations for

entrepreneurship that focus, for the most part, on economic conditions and the opportunities they

create. Economic theories of entrepreneurship tend to receive significant criticism for failing to

recognize the dynamic, open nature of market systems, ignoring the unique nature of

entrepreneurial activity and downplaying the diverse contexts in which entrepreneurship occurs.

Resource-Based Theories

Resource-based theories focus on the way individuals leverage different types of resources to get

entrepreneurial efforts off the ground. Access to capital improves the chances of getting a new

venture off the ground, but entrepreneurs often start ventures with little ready capital. Other types

of resources entrepreneurs might leverage include social networks and the information they

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provide, as well as human resources, such as education. In some cases, the intangible elements of

leadership the entrepreneur adds to the mix operate as resource that a business cannot replace.

Psychological Theories

Psychological theories of entrepreneurship focus on the individual and the mental or emotional

elements that drive entrepreneurial individuals. A theory put forward by psychologist David

McCLelland, a Harvard emeritus professor, offers that entrepreneurs possess a need for

achievement that drives their activity. Julian Rotter, professor emeritus at the University of

Connecticut, put forward a locus of control theory. Rotter’s theory holds that people with a strong

internal locus of control believe their actions can influence the external world and research

suggests most entrepreneurs possess trait. A final approach, though unsupported by research,

suggests personality traits ranging from creativity and resilience to optimism drive

entrepreneurial behavior.

Sociological/Anthropological Theories

The sociological theory centers its explanation for entrepreneurship on the various social contexts

that enable the opportunities entrepreneurs leverage. Paul D. Reynolds, a George Washington

University research professor, singles out four such contexts: social networks, a desire for a

meaningful life, ethnic identification and social-political environment factors. The

anthropological model approaches the question of entrepreneurship by placing it within the

context of culture and examining how cultural forces, such as social attitudes, shape both the

perception of entrepreneurship and the behaviors of entrepreneurs.

Opportunity-Based Theory

Prolific business management author, professor and corporate consultant, Peter Drucker put

forward an opportunity-based theory. Drucker contends that entrepreneurs excel at seeing and

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taking advantage of possibilities created by social, technological and cultural changes. For

example, where a business that caters to senior citizens might view a sudden influx of younger

residents to a neighborhood as a potential death stroke, an entrepreneur might see it as a chance

to open a new club.

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8.0 References

Øvig, Øystein Stavø & Pettersen, Inger & Aarstad, Jarle. (2018). Entrepreneurial Causation vs.

Effectuation in a Business Incubation Context: Implications for Recruiting Policy and

Management. Entrepreneurship Research Journal. 8. 10.1515/erj-2017-0065.

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