Academic journal article IBAR

Entrepreneurship: The Role of the Individual in Small Business Development

Academic journal article IBAR

Entrepreneurship: The Role of the Individual in Small Business Development

Article excerpt

While few scholars would claim nowadays that small businesses are the panacea for the economic ills of a country, there is sufficient evidence to suggest that a rising rate of new firm formation, together with efforts to improve the performance of existing firms, can add significantly to the employment base and economic efficiency of many countries. For example, Timmons (1989) argues that around 1.3 million new businesses were started in the USA in 1988 and that the great majority of the net new jobs brought into existence in the USA in the 1980s came from new and developing firms. In the United Kingdom Curran (1986) contends that, although the statistics on small business formation are far from satisfactory, there has been a significant increase in the number and scope of small business ventures since 1970.

In keeping with the increasing importance of SMEs (small and medium sized enterprises) research and conferences on entrepreneurship and small business have mushroomed over the past twenty years (Hagan et al 1989; Levitsky, 1990; Stanworth and Gray, 1991) and scholars from a variety of disciplines have been involved. Economists have examined the job generating potential of the SME sector (Storey and Johnson, 1986; Doyle and Gallagher, 1987), financial experts have assessed the need for, and the impact of, venture capital on the growth of small firms (Mason and Harrison, 1991), and sociologists have begun to examine inter-organisational networks (Johanson and Mattson, 1987; Szarka, 1990). Various units of analysis have been examined, including the individual, the organisation and the business context.

While recognising that social structures, economic factors and government policy have a major impact on new firm formation and development it is important not to underestimate the role of the individual in the process of business development. He or she relies heavily on the existence of a social and economic infrastructure and on the co-operation of many people but the individual is a crucial actor in the process of business formation and development. As Cross (1981) says, "before any other factors become important to the setting up of new companies, there must be a number of individuals with sufficient ambition and ability to establish a new firm."

If we are to understand fully the manner in which new firms emerge and develop it is important to understand the nature of the entrepreneurial process and the means by which individuals manage it.

Entrepreneurial Choice

Before discussing in detail the key components of entrepreneurship, let us digress and explain why individuals might choose such a precarious career as entrepreneurship. It is important to explore this issue because business formation precedes development and because some of the factors, for example, motivation and ability, which are influential in bringing the individual to the decision to create a venture, are also relevant for its development and growth. In addition, by comparing entrepreneurial choice with general models of occupational choice, we discover that entrepreneurship is a unique career. As a starting point, let us turn briefly to some ideas on occupational choice. Why then, do people choose particular occupations?

First, chance factors can have an influence on the occupation people choose. It is often said that in getting a job it is important to be in the right place at the right time and coincidental happenings can be important in this respect. However, it is likely that these chance factors will merely act to modify the more fundamental factors raised below. Some writers argue that a person' s basic values and beliefs will encourage him to choose an occupation that is in tune with those beliefs, (Duff and Cotgrove, 1981). For example a deeply religious person may well seek to become a member of the clergy. Trait and factor approaches are a useful approach to vocational choice (Super, 1953). Counselling psychologists sometimes help individuals to discover their basic personal traits and then inform them of the kind of attitudes and personal qualities that are necessary to perform successfully in certain jobs. …

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