Entrepreneurial Motivation


The study of the successful entrepreneurship is important for several reasons: Schumpeter, 1934, described entrepreneurship as the engine that drives innovation and change, and subsequently economic growth. Austrian economist Kirzner believes entrepreneurship is the mode through which equilibrium of supply and demand is reached. According to Shane and Venkataraman entrepreneurship converts knowledge into marketable products and services: thus a means of encouraging human creativity, and Zahra and Dess, 2001, see entrepreneurship as a vocation itself that has a large role in modern day capitalism.

All of the above takes on entrepreneurship can be justified only if the ventures undertaken are successful in the long term, as the success of entrepreneurs can only be gauged by its contribution to the economic engine, be it local or global. And like all feasts of human achievement the desire to succeed needs to back by tenacity and hard work, both of which are derivatives of motivation. Thus the objective of this paper is to review the relationship between motivation and entrepreneurial success.

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Understanding entrepreneurship

Most of the entrepreneurial theories emphasise the entrepreneur as a innovator or a creative force (Kirzner, Schumpeter) but it is important to note the term entrepreneur should be not be associated with innovators. It should instead be given to individuals who recognise a gaping hole in a market or recognise the commercial potential of a product/ service and take the necessary action to actually create demand. However, in most circumstances innovators actually see the commercial opportunity themselves.

Role of motivation in entrepreneurship

How motivation applies when exploiting an idea?

Bill Gates saw an opportunity in selling standalone operating software whereas IBM at the time did not. The commercial value that Bill Gates attached to this concept was much higher than IBM even envisaged. This possible value attached to this concept gave Bill Gates and Paul Allen the motivation to set up a company and cash in on the opportunity.

To understand the role of motivation in entrepreneurship it is important to understand the relationship between opportunity and the level of motivation. For, creating a particular product or service may be done by anyone with similar levels of technical competence and necessary financial and operational resources. But the motivation to actually convert that opportunity into a commercially viable venture will depend on the perception of opportunity presented. Opportunities are aspects of the environment that represent potentialities for profit making.

But there are various definitions of entrepreneurial opportunities. Shane and Venkataraman (2000) defined entrepreneurial opportunities as ‘‘situations in which new goods, services, raw materials, and organizing methods can be introduced and sold at greater than the cost of their production. ’’ Entrepreneurs can pursue opportunities in any industry at any time. For example, some entrepreneurs build successful new companies by creating new industries, like Rober Swanson with bio-technology. On the other hand entrepreneurs build new companies in old and mature industries, like Sam Walton in retailing.

This illustrates the level of motivation is not attached to a particular product or innovation alone, but also on the entrepreneurs perception of the future of an existing industry. The value of opportunities, for entrepreneur motivation, also varies within industries. Because the opportunities that entrepreneurs identify and pursue have different economic value, the opportunities themselves influence entrepreneurial behaviour. For example, in the early 1970s, Butler Lampson and Chuck Thacker, researchers at Xerox Parc, invented the Alto—the first personal computer (PC) at a cost of US$10000.

In contrast, Steve Jobs and Steve Wozniak started promoting the first Apple computer at a cost less than US$3000. The basis for the apple computer sales was based on the founder’s credo that offering the product at a lower cost will encourage more people to purchase the computer. Thus it motivated them to work extra hard on getting a high volume of customers than Xerox.

Entrepreneur motivation theories and their usefulness 

  1. Need for achievement McClelland (1961) introduced the concept of “Need for Achievement” (nAch) in analysing entrepreneur motivation. The premise of the this theory is that those individuals who are high in the nAch index are more likely to find the motivation to engage in activities that have a high degree of individual responsibility for outcomes, require skill and effort and have a moderate degree of risk with clear feedback on performance. These characteristics fit the basic persona of an entrepreneur. This theory was substantiated by Johnson (1990) via a traditional review of 23 studies that concluded there is a strong relationship between entrepreneurs and aAchs.
  2. Risk taking. Risk-taking propensity is another motivation of interest, which emerged from McClelland’s (1961) original research on entrepreneurs. McClelland claimed that individuals with high achievement needs would have moderate propensities to take risk. Atkinson (1957) built upon McClelland’s argument, stating that individuals who have higher achievement motivation will prefer activities of intermediate risk because these types of activities will provide a challenge, yet appear to be attainable. However, risk taking need not be classified as low risk, intermediate risk or high risk to establish whether it is a motivational factor. It is irrational to believe that an individual will undertake an entrepreneurial activity just to enjoy the risk especially when most start ups are funded by private funding or through heavy borrowing. It is more logically to view the entrepreneurs accepting the level of risk rather than being motivated by it.
  3. Tolerance for ambiguity Schere (1982) argued that tolerance for ambiguity is an important trait for entrepreneurs because the challenges and potential for success associated with business start-ups are by nature unpredictable. Budner (1982) defined tolerance for ambiguity as the propensity to view situations without clear outcomes as attractive rather than threatening. However tolerance for ambiguity is not a direct motivator but a result of motivation. Because entrepreneurs continually face more uncertainty in their everyday environment than do managers of established organizations, entrepreneurs who remain in their jobs are likely to score high on tests for this trait than would managers. There is mixed support for this prediction. Begley and Boyd (1987) found that firm founders scored significantly higher in tolerance for ambiguity than did managers, defined as nonfounders working in business. In smaller sample studies, both Schere (1982) and Miller and Drodge (1986) found that firm founders were significantly higher in tolerance form ambiguity than were managers.
  4. Locus of control Another motivational trait that has received attention is locus of control—the belief in the extent to which individuals believe that their actions or personal characteristics affect outcomes. As McClelland (1961) discussed earlier, individuals who are high in nAch prefer situations in which they feel that they have direct control over outcomes or in which they feel that they can directly see how their effort affects outcomes of a given event. This point was extended by Rotter (1966) who argued that individuals with an internal locus of control would be likely to seek entrepreneurial roles because they desire positions in which their actions have a direct impact on results. This is based on the self driven nature of the entrepreneur and his innate desire to do something important.

The research on locus of control suggests that firm founders differ from the general population in terms of locus of control. Shapero (1977) found that firm founders from Texas and Italy were more ‘‘internal’’ than other groups of professions reported by Rotter (1966). This same pattern holds with female firm founders versus the general female population (Bowen & Hisrich, 1986) and with Black firm founders versus the general Black population (Durand, 1975).

Entrepreneurial success, what is?

Success can be vaguely defined as achieving a set objective. But in the world of the entrepreneur definition of success is not only about generating sufficient cash flow to sustain a certain standard of living, but it is also about satisfying the needs of others who have an interest in the business. Wickham, 2001, identified the components of entrepreneurial success: Performance of the venture. Meeting the expectations of those having a vested in the venture, and However, it is important to note that success is a relative term and also depends on the competition. Therefore an entrepreneur’s measurement of success in one year may be very different to his success in the subsequent years.

For example: achieving the same absolute profit in consecutive years may affect the cash flow of the business but it will be a sign of failure if the entrepreneur expected to achieve a 5% rise in profits. The motivational factors as identified above (nAch, locus of control, desire for independence, passion, and drive) influence the transition of individuals from one stage of the entrepreneurial process to another. In some cases, all of the motivations might matter. In other cases, only some of the motivations might matter.

The relative magnitudes of how much each motivation matters will likely vary, depending on the part of the process under investigation. In fact, it is quite plausible that motivations that influence one part of the process have all of their effects at that stage in the process and have no effects on later stages in the process. Entrepreneurial success is mainly dependent on the character traits of the entrepreneur. To analyse these character traits reference to existing leadership models are used as the traits of a successful leader and a successful entrepreneur seem the very similar.

They are both leadership roles and the entrepreneurial trait of locus of control (identified above) gives further credence to the necessity for entrepreneurs to study leadership success. Trait Theory The trait theory was mainly used for selection of leaders for foreign missions in the military. It was developed on the premise that by studying and isolating the qualities of historically great leaders, it was possible to form a benchmark for selecting individuals for key areas of leadership. Philosophically put, the promoters of this theory believed that leaders were born and not made.

The key traits of a successful entrepreneur can be identified as:

  • Ability to see and capitalise on opportunities
  • Able to analyse situations and adapt accordingly to meet goals
  • Ability to articulate thoughts and objectives in a way that can energise people
  • Ability to make tough decisions

There is no such thing as a born leader but there are a whole variety of characteristics that might make a person a good leader, which people have a mixture of. The Functional Theory of leadership introduced by John Adair says that any group has a number of functions it needs to perform – basically, three needs that need to be fulfilled can also be applied an entrepreneur in business. Here the leader is the one that can satisfy all these needs: team, task and individual.

Here the ability of the leader is based on his or her ability to integrate the team, task and individual with the right balance. Simply put it can be sequenced as follows:

  • Set vision and goals
  • Identify the various functions required to achieve the vision
  • Give responsibility of those functions to the right people (sub-leaders)
  • Ensure that the functional leaders work as a team
  • Evaluate performance and compare performance against targets
  • And finally, make changes where necessary

To achieve the above it is essential that the leader exhibits or has the potential to develop the leadership traits identified under the Leadership Traits Theory. And in developing leadership programs it is essential that the features of leadership identified in these theories are addressed In conclusion it should be notes that all the leadership theories place emphasis on personal integrity, strong will and building expertise in the relevant fields or industries. This is especially important since in the world of business building brand image is essential. It needs to start with the leader of the business.

Understanding the relationship between entrepreneurial motivation and entrepreneurial success

The analysis of the relationship will be based on the following studies: Collins et al. (2000), using the “Need for Achievement” concept of McClelland (1961) , concluded that those motivated by nAch were more likely to experience entrepreneurial success than those without the nAch factor. Thus, nAch could play a very useful role in explaining entrepreneurial success.  Successful entrepreneurs take calculated risks.

But their level of risk tolerance is higher than other with lower need for achievement: this increased capacity of risk is based on their motivation to succeed (Sarasvathy, Simon, and Lave (1998) Factors other than motivation that contribute to entrepreneurial success Motivations are not the only things that influence these transitions. Cognitive factors, including knowledge, skills, and abilities (KSAs), certainly matter in entrepreneurial success. All action is the result of the combination or integration of motivation and cognition (Locke, 2000).

First, the entrepreneurs need to have some knowledge, especially of the industry and of any relevant technology that is critical to success. They can hire people with certain specialized skills that they lack, but they must possess enough expertise to know that they are doing the right thing. Second, the entrepreneur must have skills. The necessary skills will depend on the circumstances, but they may include such factors as selling and bargaining, leadership, planning, decision making, problem solving, team building, communication, and conflict management.

Third, the entrepreneur needs to have the requisite abilities, including intelligence. Possessing the necessary KSAs enables the entrepreneurs to develop a viable vision, including a strategy for the organization and to carry it out successfully. Motivation helps the entrepreneur to acquire such KSAs in the first place and provide the impetus and energy to implement the needed actions to succeed. The human capital literature in entrepreneurship (e. g. Bates, 1990; Schoonhoven, Eisenhardt, & Lyman, 1990) has begun to show the effect of certain types of knowledge and skills on the start-up and resource assembly parts of this process.

The opportunities themselves certainly matter in entrepreneurial success. Prior research has shown that such things as the possession of a patented technology make individuals more likely to engage in the entrepreneurial process (Shane, 2001). One would expect that identification of a large market or a high margin product would do the same.

Furthermore, environmental conditions matter. First, opportunities may interact in interesting ways with the attributes of people. Second, as much f the macro level research has shown, the willingness to engage in entrepreneurial activities depends on such things as the legal system of the country in which the entrepreneur operates, the age of the industry, the availability of capital in the economy (and to the industry in particular), the condition of capital markets, and the state of the overall economy. These factors are important, but that it might also be interesting to know whether motivations of particular people lead to different types of entrepreneurial action under different environmental conditions.

Motivations might be more or less stronger than these other factors in the degree that they influence particular transition points. In addition, there might be important and interesting interaction effects between motivations and opportunities, KSAs, and environmental factors. Empirical example illustrating the relationship between entrepreneurial motivation and entrepreneurial success Google A little background research into the meteoric rise of this company indicates that the founders, Sergis Brin and Larry Page, identified a previously unexploited market, used their superior technical knowledge to develop a technology for this market.

The success of this venture was based on their motivation to exploit a new idea to its full potential which they believed appealed to a broader market. But it should be noted that the main reason they succeeded was because they offered a new product that was commercially viable – highlighting the fact that motivation needs to materialise into an end product or service with a differentiating factor. It also highlights the fact that the degree of success depends on scope of the offering.

For example, a Stanford University graduate with the same motivation as Sergie Brin and Larry Page but with a lower level of technical competence may not be able to develop something of Google’s marketability. Thus, even if this student sets up a successful business, it might not be the success story that is Google. Conclusion All successful entrepreneurs are highly motivated and highly energised. They picture their goals and take whatever actions necessary to achieve those goals. However motivation alone is not sufficient to become successful.

In addition to the adequate resources the successful entrepreneur need to be self driven, articulate, able to make tough decisions, thick skinned, able to create and maintain brand image, and most important have a great product or service to represent.


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