Who Becomes a Small Scale Entrepreneur in a Post-Socialist Environment: On the Differences between Entrepreneurs and Managers in East Germany

By Utsch, Andreas; Rauch, Andreas et al. | Journal of Small Business Management, July 1999 | Go to article overview
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Who Becomes a Small Scale Entrepreneur in a Post-Socialist Environment: On the Differences between Entrepreneurs and Managers in East Germany


Utsch, Andreas, Rauch, Andreas, Rothfuss, Rainer, Frese, Michael, Journal of Small Business Management


Small and medium-sized enterprises hold an important place in the modern economy. They constitute about 95 percent of all European enterprises and provide 60 percent of all jobs (Gleichmann 1990). They are also assumed to be more adaptive and innovative than larger companies. They are of particular importance in East Germany and in general in East Europe. First, it was difficult to develop entrepreneurship in East Europe (Frese 1995) and second, hope to reduce unemployment is mainly centered on the development of a small-scale enterprise sector. Moreover, small-scale enterprises have been shown to be the most promising and successful of all enterprises in East Germany (Deutsche Bundesbank 1993).

In this study we investigated the differences between entrepreneurs and managers in East Germany in order to know more about who becomes a small-scale entrepreneur in a post-socialist environment. We did this by using personality orientations that made up an entrepreneurial personality. We conceptualize personality orientations to mean propensities to use certain behaviors for the work task, given that the environment allows the expression of these orientations.

Personality has frequently been studied in entrepreneurship research (see overviews by Brockhaus and Horwitz 1986; Gartner 1989; Shaver and Scott 1991). However, there has also been a number of criticisms of the idea that personality is important for entrepreneurship research. Gartner (1988, 1989) argued that studying behavior is more fruitful than studying personality traits. Personality researchers have of course countered that behavior is inextricably related to personality traits (Epstein and O'Brien 1985).

This study is based on the premise that there may be some value in differentiating between the decision to become an entrepreneur and the success of an entrepreneur. This distinction has proven to be useful in the debate on personality in leadership research. Early research relied on a pure personality-based approach to explain leadership success (see reviews by Bass 1990; Kirkpatrick and Locke 1991). Later this was criticized by Stogdill (1948) who argued that traits are not important for leadership.

The differentiation between leader emergence and leader effectiveness has further clarified the role of personality traits. Leader emergence is more heavily related to personality issues than leadership effectiveness (Kenny and Zaccaro 1983; Lord, DeVader, and Alliger 1986). While there are clear differences between leaders and entrepreneurs, it is reasonable to compare leadership research and entrepreneurship research. Both involve the study of leadership, of management, of working in a risky and competitive situation, of a high degree of responsibility, and of a far-reaching career decision. We think that similar to leadership, entrepreneur emergence is more strongly related to personality factors (Herron and Robinson 1993; Begley and Boyd 1987) than entrepreneurial success. Thus, we think that personality is one factor in the decision to become an entrepreneur, but is not necessarily a factor in the success of an entrepreneur. Obviously, these are two different criteria that are often not kept clearly apart in entrepreneurship research. In this study we are only interested in personality as one determinate of becoming an entrepreneur.

Moreover, the relationship between personality traits and behavior is stronger in situations that do not constrain the person - so-called weak situations (Adler 1996). This is of particular importance for our study because the situation in East Germany was "weak" with regard to the decision to become an entrepreneur. We studied the differences between small-scale entrepreneurs and managers in East Germany (formerly the socialistic German Democratic Republic, which was characterized by a radical and revolutionary transformation from bureaucratic socialism to capitalism). We define a small-scale entrepreneur as anyone who has founded a business.

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