Why Not All Small Business Managers/Owners Are Entrepreneurs

                                                                          

 

Peter Engholm

Monash University, May 2000

 

 

 

ABSTRACT:

One might argue that all small business owner/managers possess some common characteristics that can be attached to a concept of entrepreneurship, and although these owner/managers may not possess all those characteristics, it is still possible to trace a close link between entrepreneurship and small firms. This paper shall argue that there is such a general link but that it cannot be said to be true for all owner/managers.

 

KEYWORDS:

SME, Managers, Entrepreneurs, Organisations

 

FULL TEXT:

Some writers of contemporary articles and books that deal with the issue of small and medium sized firms seem to tie the concept of entrepreneurship as a necessary component to the character of the firm’s owner/manager - that is, arguing that all small business owners/managers also are entrepreneurs. This is an intriguing and daring statement, as it would imply some special relationship between two concepts that, by simply applying logic, cannot be compared. The reason is that it creates a situation where one is forced to link characteristics and traits within, and actions by, an individual human being (entrepreneurship) to some distinct definition of what makes up a small firm, and pure logic says this cannot be done.

On a shallower and more general level, however, one might argue that all small business owner/managers possess some common characteristics that can be attached to a concept of entrepreneurship, and although these owner/managers may not possess all those characteristics, it is still possible to trace a close link between entrepreneurship and small firms. This paper shall argue that there is such a general link but that it cannot be said to be true for all owner/managers, and it starts by exploring the definition of entrepreneurship:

An entrepreneur, according to Gibb (1996: p.312) is “an opportunity seeker who combines the factors of production in an innovative manner and who seeks out and exploits opportunities and gaps in the market”. By this definition, Gibb stresses the importance of innovation and opportunity-seeking, and later in his article adds other individual characteristics, such as independence, coping with uncertainty, risk-taking, creativity, flexibility, and various skills, to the definition of what constitutes an entrepreneur (Ibid. pp.313-314). Gibb then tries to link this concept of an entrepreneur to a concept of the small firm, arguing that certain basic stimuli for entrepreneurial behaviour lie naturally within the culture, task structure and learning environment of the owner-managed firm. At first, it seems as if he attempts to create the special relationship that already in the beginning of this paper was argued cannot be done, but his aim is rather to focus on the continuing, developing relationship between the owner/manager and his or her firm, meaning that the small firm does not necessitate an entrepreneurial owner/manager, but more or less provides a natural environment for the growth of entrepreneurial qualities within its owner/manager (Ibid, pp.314-315).

Clark’s definition of the entrepreneur follows Gibb’s, but also includes characteristics such as: high self-confidence, having high standards, being hard-driving, emotionally charged, overly energetic, and striving to maintain control over his or her own destiny (Clark, 1997). Can it then be said that if an owner/manager possesses some or all of these characteristics, he or she is an entrepreneur? The answer is yes, if this is the definition one chooses to apply to ‘entrepreneur’ - but here the paper touches on the real problem, namely that there is no general accepted definition of what constitutes an ‘entrepreneur’. Gibb and Clark have shown to have a similar understanding of the concept, although the definitions slightly differ from each other. The Oxford dictionary has another, more vague, definition of ‘entrepreneur’, explaining it as a “person in effective control of commercial undertaking; one who undertakes a business or enterprise…”, but there would be few writers on the topic who would agree that this definition justifies the modern understanding of an entrepreneur. The author of this paper rather finds the definition of entrepreneurship held by Curran and Burrows, and discussed by Watson (1995, pp.38-39), to be the most accurate:

Entrepreneurship is the innovatory process involved in the creation of an economic enterprise based on a new product or service which differs significally from products or services offered by other suppliers in content or in the way its production is organised or in its marketing.

This definition of ‘entrepreneur’ is not so much concerned with the various traits brought up by Clark and Gibb, but rather focuses its attention on the product and the process of innovation. As Watson notices, this notion “excludes any small business owner whose enterprise is a replica of an existing business or who inherit or purchase an existing business and add little or nothing novel to its operation” (Watson, 1995, p.39). If this definition is adhered to, one can clearly argue that not all small business owners/managers are entrepreneurs, as many firms, such as family firms and small firms that are bought up and where another manager is installed, would fit into this category. Perry et al. (1985, pp.56-58) wrote a century earlier that an entrepreneur is “a member of the subset of business owner-managers who actually create a new business”, and that definition also acknowledges innovation as a major criterion for defining entrepreneurship. By simply defining a small business owner-manager as “a person who makes all the major management decisions in a small business and has equity capital at risk in the business”, Perry et al. (Ibid.) make the distinction between the two concepts clear: a small business manager/owner can not be directly linked to entrepreneurship. But if it is so clear that there is no explicit connection between these two concepts - why then are they so often interrelated and discussed?

The answer to this question can probably be found in various studies undertaken that show how entrepreneurial traits among many small business owners/managers correspond to and are similar to situations that small firms may find themselves facing. For example, innovativeness has been mentioned as one major characteristic of an entrepreneur, and for small firms, innovativeness is often one of the major sources (if not the major one) that enables a small business to come into existence and grow. Entrepreneurs are often described as hard-working and energetic, and it is widely acknowledged that small firms often face a tougher environment than large, mature firms - necessitating input of more hours and hard work by its owners/managers and employees.

Therefore, it is easy to see a link between small business owners/managers and entrepreneurship, but it has been shown that by no means do these two concepts necessarily equate. Entrepreneurship among owners/managers is seen as a positive attribute that enables small firms to compete and grow in a developing modern economy, but the term should not be used as a ‘general’ term that would include all small business managers and owners just because they might have one trait or two that to some degree reflects entrepreneurship. There needs to be at least some innovative component that singles out the firm - and the actions by the owner/manager - if he or she can be seen to be entrepreneurial.

As a concluding remark, one could argue that the concept of ‘entrepreneurship’ itself is emerging and maturing, and what it will be as a mature contributor to the economy is yet to be determined.

 

Any reproduction or distribution of this text is prohibited without express permission by the authors. Please contact peter@engholm.nu for permission or further information.

 

REFERENCES:

Clark, S. (1997). “Entrepreneur’s traits key to success - or failure”, The Business Journal, June 16,  http://www.bizjournals.com/portland/stories/1997/06/16/smallb5.html.

Gibb, A. (1996). “Entrepreneurship and Small Business Management: Can We Afford to Neglect Them in the Twenty-first Century Business School?”, British Journal of Management, Vol. 7, pp.309-321.

Perry, C., Macarthur, R., Meredith, G., & Cunnington, B. (1985). “Need for Achievement and Locus of Control of Australian Small Business Owner-Managers and Super-entrepreneurs”, International Small Business Journal, Vol. 4, No. 4, pp.55-64.

The Consise Oxford Dictionary. (1989). 7th Ed.

Watson, T. (1995), “Entrepreneurship and Professional Management: A Fatal Distinction”, International Small Business Journal, Vol. 13, No. 2, pp.34-46.