The Entrepreneur – Psychological and Sociological factors

Entrepreneurs have the potential to contribute so much to society, researchers have tried to analyze their personalities, skills, and attitudes as well as the conditions that foster their development. Research has shown that certain psychological and sociological factors are characteristic of entrepreneurs.

Like most people, entrepreneurs are complex, and no one theory can explain all of their behavior. Perhaps the first and certainly the most important theory of entrepreneurship’s psychological roots was put forward in the early 1960s by David McClelland, who found that people who pursued entrepreneur like careers (such as sales) were high in need-achievement, the psychological need to achieve. People with high need achievement like to take risks, but only reasonable ones, and such risks stimulate term to greater effort. Moreover, certain societies tended to produce a larger percentage of people with high need-achievement. Other researchers have studied the entrepreneur’s motives and goals which seem to include wealth, power prestige, security, self-esteem and service to society.

In the mid-1980s two psychologists studied the psychological literature on entrepreneurship in an effort to distinguish between entrepreneurs and people who manage existing small businesses. They ultimately identified five dimensions:

1. Need achievement: Entrepreneurs are high in McClelland’s concept of need achievement
2. Locus of control: This is the idea that individuals –not luck or fate – control their own lives. Entrepreneurs and managers both like to think they are pulling their own strings.
3. Tolerance for risk: Entrepreneurs who are willing to take moderate risks seem to earn higher return on assets than entrepreneurs who either take no risks or take extravagant risks.
4. Tolerance for ambiguity: To some extent, every manager needs this, because many decisions must be made with in complete or unclear information. But entrepreneurs face more ambiguity, since they may be doing certain things for the first time ever and because they are risking their livelihood.
5. Type ‘A’ Behavior: This refers to the drive to get more done in less time and if necessary despite the objections of others. Both founders and managers of small businesses tend to have much higher rates of type A behavior than do other business executives.

Clearly, the entrepreneur needs self-confidence drive, optimism and courage to launch and operate a business, without the safety of a steady paycheck. Sometimes, entrepreneurs decide to launch a new venture because they cannot ignore their dream, their vision, and they are willing to risk security for financial gain. In other cases, they are pushed by circumstances beyond their control such as a corporate cutback (an increasingly common phenomenon today), or frustrated by limited opportunities for advancement, or driven by the need to coordinate personal and professional goals. Faced with these circumstances, many individuals find the courage and confidence to take control of their professional fate.

Often members of minority groups feel employers discriminate against them either directly or indirectly. And in fact, if we look at the progress of the various groups which make up for our heterogeneous nation and the spate of lawsuits brought against corporations, their feelings are often based in reality. To succeed in the corporate culture, some minorities feel they must sell their souls by giving up their racial, ethnic, or sexual identity. Others bump their heads against the glass ceiling. New studies indicate that less than 5 percent of the top executive jobs in the United States are held by minorities. These frustrations have left many minorities thirsting for an environment that suits their needs and allows them the latitude to create and thrive. This desire coupled with the perennial enticements of entrepreneurship, have made minority entrepreneurs common in today’s business world.

For African Americans this can mean an opportunity to move out of what has been a white, male-dominated corporate structure Increasingly African Americans are seeing the new service sector businesses ranging from advertising to architecture services as a place of opportunity and growth. One advantage of the small business service area is that it is less capital intensive. Another benefit is that more and more corporations are contracting out services traditionally provided in-house. —