The Impact of the Entrepreneur's Personality on the Strategy-Formation and Planning Process in SMEs

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ABSTRACT

The objective of this study was to explore the impact of the entrepreneur's character on the development of strategy in small- to medium-sized firms. While researchers have looked at entrepreneurial traits in order to explain business start-up and growth, little attention has been paid to the possible interactions between entrepreneurial types and the strategic choices they make. This study identified two main types of entrepreneurs, the pragmatist and the charismatic entrepreneur, which resulted in different patterns of strategic behaviour. The research suggested that different types of entrepreneurs faced different problems, and that their responses to crises varied. The study suggests that the charismatic entrepreneurs were forced to review their propensity to take risk, share power and involve more people in the decision-making process and this resulted in a more rational, planned approach to the strategy-making process. Financial planning became a priority for both types of entrepreneur.

THE CONCEPT OF STRATEGY

Numerous perspectives on strategy and numerous definitions of the term 'strategy' exist (Mair, 1999). The term 'strategy' refers to the direction and scope of an organisation over the long term and strategic decisions are generally broad, encompassing details about product range, market scope and competitive approach (Wickham, 1998). According to Porter (1996) the essence of strategy is choosing to perform activities differently from rivals, which requires creativity and insight. In the planning school of thought (Chandler, 1902; Ansoff, 1965), the term 'strategy' is usually defined as a formal plan, and planners perform a detailed analysis of the company, its product-market and its environment (Lambkin, 1997). In the process school of thought, writers (Mintzberg and Waters, 1985; Pettigrew, 1992) focus on the processes by which actions are decided and implemented. Writers in the process (or emergent) school of thought have highlighted the emergent nature of strategic actions due to cognitive limitations, learning (Quinn, 1980), cultural biases (Peters and Waterman, 1982) and organisational politics (Pfeffier, 1981).These writers have outlined the difficulties involved in planning a strategy and then trying to implement it as planned. Researchers (Mintzberg and Waters, 1985; Hayashi, 2001) have proposed that the strategy formation process was not simply an exercise in rationality but reflected experimentation, exploration, intuition, instinct and learning. Hamel (1996) highlighted that strategic plans were often inflexible and led planners to overcommit themselves to specific future predictions. Today, researchers are attempting to transcend this dichotomy between the planning and process views of strategy. While the first approach overstates the value of deliberate thinking and rational planning, the second approach underemphasises the value of rational planning within most companies (Ginsberg, 1994).

RESEARCH OBJECTIVES AND RATIONALE FOR STUDY

The main objective of this study was to explore the impact of the entrepreneur's character on the development of strategy in small- to medium-sized firms. The small business literature on strategy falls into two main categories: the first focuses on the traits of effective entrepreneurs and the second relates to planning. Entrepreneurial discourse (as set out by Gasse, 1977; Kets de Vries, 1977; Brockhaus, 1982; Mintzberg and Waters, 1985; Timmons, 1999) has emphasised the critical role played by the entrepreneur in the management of the enterprise. Researchers have focused on the traits associated with effective entrepreneurs (Carland et al., 1996) and a related stream of research seeks to develop a typology of business leaders. For instance, Kets de Vries and Miller (1984) suggest that the neurotic character type finds it difficult to cede control of the venture. The entrepreneur tends to have a strong desire for autonomy and control (Timmons, 1999) and these characteristics, if unchecked, can hamper growth of the venture. …