Myths and misconceptions in entrepreneurship

Just last week a colleague from the UK asked me to share with them a document I used for a training course on entrepreneurship education with the National Council for Graduate Entrepreneurship.  The paper was on the ‘Myths and Misconceptions of Entrepreneurship‘ which was written as collective exercise between a number of people (Luke Pittaway, Jason Cope, Ellie Hamilton, Frank Cave) at Lancaster University in 2001.  I thought it would be worthwhile to share these myths and misconceptions more widely via this blog:

‘Entrepreneurs are born and not made’

Much of the early research in entrepreneurship has focused on trait theory and the personality of the individual (Chell, 1985).  As a consequence, it is often assumed that individuals have certain inherent traits that predispose them to entrepreneurial activity. From this perspective, it is deemed possible to build a personality profile which identifies the entrepreneur. More recent research indicates that entrepreneurial skills, abilities, behaviours and perceptions are dynamic, and can change over time and through experience and learning (Cope, 2001).  People may display some of the classic traits such as need for achievement, risk bearing, creativity but these are not necessarily stable or static characteristics. Entrepreneurship can also be viewed as a social construction (Chell and Pittaway, 1998; Pittaway, 2000) occurring within and shaped by particular social, historical and cultural contexts.  In other words nobody really knows and there are many disagreements about it even in the academic research.

‘Entrepreneurship is synonymous with new venture creation’

Entrepreneurship is often seen as a set of activities involved in organization creation (Gartner, 1985).  From a more dynamic perspective, it is reasonable to argue that the study of entrepreneurship should encompass the entirety of the entrepreneurial experience, prior to, during and after start-up.  By focusing on new venture creation alone, the rich and complex process of how entrepreneurs negotiate the management of a growing enterprise or venture is largely ignored (Cope, 2001).  Forms of entrepreneurial activity have seen to occur in many contexts other than simply during venture creation and this is, therefore, just one perspective.

‘Entrepreneurship is all about making a fortune’

Entrepreneurship is often associated with making money and creating a personal fortune.  For some people, this may indeed be the case.  However, even in a business context the underlying motivations for any individual may be extremely complex and can include the need to: achieve independence/autonomy; be challenged; create something new; exploit an opportunity; influence others; or simply to make a living.  Money is often the mechanism through which individuals (and those around them) measure their success rather than an end in itself.

‘Entrepreneurship only takes place in a business context’

Entrepreneurship is often associated with wealth creation in a business context. However, the same sets of behaviors and activities may be found in a number of other contexts – public sector, voluntary sector and other non-profit organizations. There is growing interest, both politically and academically, in the notion of ‘social entrepreneurship’ and ‘social enterprise’.  The triggers for such activity and behavior may be different (for example, the response to a perceived social need or gap in provision).   It is not clear from the limited research to date whether there are significant contextual differences in terms of motivation, perceived rewards, use of networks, etc.  What is clear is that the sectoral boundaries between ‘public’, ‘private’ and ‘voluntary’ may become blurred.

Entrepreneurship is all about the cult of the individual’

Entrepreneurs are often portrayed as ‘heroes’ and entrepreneurial endeavor (particularly in Western societies) is associated with the expression of individualism.  Even where an individual is perceived to be leading entrepreneurial activity, this is not achieved without the involvement of others – who often occupy crucial roles within the organization.  Research in high growth firms in Silicon Valley, for example, indicates that a balanced team has an impact on long-term business growth and survival (Eisenhardt and Bird-Schoonhoven, 1990). In smaller firms the support network, the family and domestic partners are also viewed to have a significant impact on both the entrepreneur and the development of the small firm.  Entrepreneurial activity, therefore, is not always driven by individuals.

‘SMEs are a homogenous group’

Small businesses and owner-managers are often treated as a homogenous group, particularly for policy purposes.  This is, however, a gross over-simplification.   The SME sector is characterized by its diversity, e.g.:

  • Size – a micro-business employing less than 10 employees has a quite different dynamic to small and medium-sized enterprises employing 25-50 employees.
  • Industry sector – SMEs differ considerably between industry sectors depending upon their technology base and the dynamics of their market.
  • Owner-managers – differ in terms of their underlying business motivations, aspirations, experience and business strategies.

‘All owner-managers want to grow their business’ 

Western economies have institutionalized the concept of business growth, exemplified in the concept of GDP.   The SME sector is often heralded as the engine of economic growth (OECD, 1998).  As a consequence, much support for small businesses works on the assumption that all business owners wish to grow their business. Research evidence suggests that a desire for business growth amongst SMEs cannot be assumed (Gray, 1998).  Some owner-managers operate a business as a means of sustaining a particular lifestyle, whilst others wish to keep the business at a size that remains under their personal control.  Interestingly, some owner-managers actively pursue a strategy of business closure if they perceive this to be the best course of action.  The number of owner-managers that pursue substantial growth is only in the region of 15% (Carter et al, 2001).

‘Entrepreneurs are risk-takers’

It is a commonly held belief that entrepreneurs take risks.  However, research illustrates the complexity surrounding the concept of risk.  Some theorists argue that entrepreneurs are ‘moderate’ risk takers (Brockhaus, 1980; Gasse, 1982), whilst others suggest that entrepreneurs take ‘calculated’ risks (Timmons et al, 1985).  There are significant difficulties associated with any attempt to measure an entrepreneur’s risk-taking propensity, as the concept of risk is a subjective one. An observer may view the entrepreneur to be taking a risk whilst the entrepreneur might feel that he/she is actively trying to minimize the risk being taken (Chell et al, 1991).

‘Entrepreneurship cannot be taught’

Entrepreneurship courses are now being offered in a large number of US universities. ‘Two main types of course are evident: courses for entrepreneurship, and courses about entrepreneurship.’ (Levie, 1999; p4).  A common demarcation is that courses for entrepreneurship emphasize experiential learning and connection with entrepreneurs and entrepreneurial activity, whilst courses about entrepreneurship tend to be delivered in a more traditional manner – through lectures, textbooks and assessed through essay and exams.  These two different pedagogical approaches need not be mutually exclusive.  In teaching entrepreneurship, the subject can be approached from a functional, managerial perspective – studying the processes of start-up, sources of appropriate finance, forms of legal entity, the management of growth, exit strategies, etc.  Another underlying purpose may be to sensitize individuals to the contexts in which entrepreneurial activity may occur – for example, within small businesses, large corporations (termed corporate entrepreneurship or intrapreneurship), the public sector and voluntary organizations.   More broadly, there are interesting issues to be considered from social, historical, cultural and moral perspectives.

References:               

Brockhaus, R H (1980), ‘Risk taking propensity of the entrepreneur’, Academy of Management Journal, 23, 3, pp 509-520.

Carter, S et al (2001), ‘Barriers to Survival and Growth in UK Small Firms’, Report to the Federation of Small Businesses, London.

Chell, E (1985), ‘The entrepreneurial personality: a few ghosts laid to rest?’, International Small Business Journal, 3, 3,  pp. 43 – 54.

Chell, E and Pittaway, L (1988), ‘The social constructionism of entrepreneurship’, 21st ISBA National Small Firms Policy and Research Conference, Durham University Business School.

Cope, J (2001), ‘The entrepreneurial experience: towards a dynamic learning perspective of entrepreneurship’, PhD Thesis, Lancaster University. Lancaster.

Eisenhardt, K M, and Bird-Schoonhoven, C (1990), ‘Organizational growth: linking founding team, strategy, environment, and growth among US semiconductor ventures, 1978 – 1988′,  Administrative Science Quarterly, 35, pp. 504-529.

Gartner, W B (1985), ‘A conceptual framework for describing the phenomenon of new venture creation’, Academy of Management Review, 10, 4, pp 696-706.

Gasse, Y (1982), ‘Elaborations on the psychology of the entrepreneur’ in: Encyclopedia of Entrepreneurship, C A Kent, D L Sexton and K H Vesper (eds), Englewood Cliffs NJ: Prentice Hall.

Gray, C, (1998), Enterprise and Culture, London: Routledge.

Levie, J (1999), Entrepreneurship Education in Higher Education in England: a survey.  Survey commissioned by the Department for Employment and Education.

OECD (1998),  Fostering Entrepreneurship,  Paris: OECD.

Pittaway, L A (2000), ‘The social construction of entrepreneurial behaviour’, PhD Thesis, University of Newcastle. Newcastle-upon-Tyne.

Timmons, J A, Smollen, L E and Dingee, A L M (1985), New Venture Creation, Homewood, Illinois: Irwin.

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About lukepittaway
Dr. Luke Pittaway is a Professor of Entrepreneurship

One Response to Myths and misconceptions in entrepreneurship

  1. Hi Luke

    Thanks for that post, great concise discussion of the key issues

    Regards

    Matt

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