Developing a Model of Entrepreneurship Style

ABSTRACT With small businesses and entrepreneurships accounting for 60% percent of the new jobs in the United States each year, it is crucial to examine the factors relating to the success and failure of these ventures. Most of the previous literature examined the issues from the business' point of view. Few examine the traits or characteristics of the entrepreneur. This paper proposed to develops a structural equation model to look at the characteristics of an entrepreneur that predict success of his/her business ventures. INTRODUCTION Why is the study of small businesses and entrepreneurship so important? According to McAveeny (2000) "99% of employer firms" are businesses that employ less than 100 employees and earn less than $5 million a year in sales (p. 15). However, according to Monk (2000), 48% percent of those businesses will fail within the first five years. Other authors consider this a conservative figure of small business failure (Ponthieu & Insley, 1996). Considering that these businesses account for 60% of the new jobs in the US each year (McAveeny, 2000), it is important to examine the issues concerned with entrepreneurship and small businesses. Many authors have examined what factors promote the success of small business and why so many of these businesses fail (see Jennings & Beaver, 1997; Hemmasi, Graf, & Winchel, 1996; Lussier, 1996; McAveeny, 2000; Monk, 2000; Palmer, Decker, & Emery, 1994; Ponthieu & Insley, 1996; Huang & Brown, 1999 for review). Yet, only a few authors have examined the entrepreneurial issues tied in with these businesses (Gray & Eylon, 1998; Gundry & Welsh, 2001; McNeil 8c Burgar, 1991; Walls, Capella, & Greene, 2001). It is our contention that more work needs to be done in this area. The purpose of this paper is to develop a model, which will examine and help us understand factors behind entrepreneurial style, which we believe to be a key element in entrepreneurial success. The next section will contain a literature review of relevant literature. The third section of the paper will discuss the variables included in the model, with propositions and suggestions for operationalization. The final section will examine future research ideas for the model. LITERATURE REVIEW There are perhaps two major difficulties in the research that hinder us from getting a clear picture of the reasons behind success and failure of entrepreneurship. One is the fact that often the terms small business and entrepreneurship are interchanged. Jennings and Beaver (1997) discuss the idea that the creation of a small business is not necessarily an entrepreneurial activity. While most people assume that anyone who starts their own business is an entrepreneur, Jennings and Beaver (1997) suggest that this is not always the case. There are people (i.e. artisans) who drift, or are pushed, into a small business with no intention of maximizing profits or growth. Therefore, using factors relating to small business success or failure is not always appropriate in entrepreneurial study. Along those same lines, Ponthieu and Insley (1996) discuss the fact that small business failure is often equated with entrepreneur failure. Usually when we see a small business fail, we blame the owner/manager without looking at other issues. Ponthieu and Insley (1996) instead offer the terms business discontinuance or business mortality to distinguish between business failure and entrepreneurial failure. Success versus Failure The second difficulty is the lack of a clear definition of success and failure in an entrepreneurial activity. Watson and Everett (1999) suggest that small business failure can be defined as discontinuance of a business for any reason, formal bankruptcy proceedings, other bankruptcy and failure to 'make a go of it'. Huang and Brown (1999) discuss success and failure by examining the different classifications of potential problems in a small business. …