Topic 3

The Dark Side of Entrepreneurship

The Entrepreneur’s Confrontation with Risk:

• Financial risk versus profit (return) motive varies in
entrepreneurs’ desire for wealth.
• Career risk—loss of employment security
• Family and social risk—competing commitments of
work and family
• Psychic risk—psychological impact of failure on the
well-being of entrepreneurs
Motivation
Motivation

• Entrepreneurial behavior is the result of

entrepreneurial motivation.

• Motivation has been derived from the word ‘motive’

which implies the inner state of mind that activates,
provokes and directs our behavior towards the goal.

• Motivation is a process that motivates a person into

action and induces him to follow the course of action
till the goals are finally achieved.
Introduction & Definition of Motivation
▪ To motivate means to provide motive, to impel people
to action, and to create incentives to work.

▪ “Motivation is the work a manager performs to

inspired, encourage, and impel people to take
required action” – Lewis Allen

▪ “The act of stimulating someone or oneself to get a

desired course of action”- Michael J

▪ “Motivation means stimulating people to action to

accomplish desired goals.”- William Scott
According to Bernard and Steener, “ A motive is an
inner state that energies, activates or moves and that
directs behaviour towards goals”.

Nature of Motivation.
▪ Internal feeling of an individual.
▪ These feelings prompt him to work more.
▪ Energies towards productive action.
▪ Motivation is linked to satisfaction.
▪ An individual is motivated in totality.
Motivations

• Deciding what your motivations are will

direct you toward what type of business fits
you best.
• Objectives:
1. Lifestyle Venture
2. Smaller Profit Venture
3. High Growth Venture
1. Lifestyle Venture

• Small company that provides its owner

independence, autonomy, and control.
• Is often run out of household
• Provides flexibility (hours, meeting places,
attire)
• Aligns your personal interests and hobbies
with your desire to make a profit.
2. Smaller Profit Venture

• Small company not concentrated on pushing

the envelope and growing inordinately large.
• Making millions of dollars not important.
• Content with making a decent living.
• Ex. Mom and Pop Stores
3. High Growth Ventures

• Goal is maximum profit and growth.

• Concentrated on pushing envelope and
growing as large as possible.
• Focus on innovation
Importance of Motivation

High Satisfaction and Morale

Increased productivity

Contribution to organizational goals

Congenial work environment

Reduced absenteeism and turnover

Acceptance of organizational change

Entrepreneurial Motivation

▪ What make people responsive to opportunity?

▪ What drive them to entrepreneurship?

▪ Answering these question entail the

examination of entrepreneurial motivation

▪ Motivation is defined as a drive that cause a

person to take some goal oriented action.
Basic elements of the process of motivation

Motive

Goal Behavior
Entrepreneurial Motivation

▪ Motivational theories are based on the idea that

behavior is essentially purposeful and directed
towards the attainment of certain goal.

▪ Thus entrepreneurial motivation is viewed as the

willingness of an entrepreneur to sustain his or
her entrepreneurial behavior.
Types of Motivation

There are two types of motivation:

▪ Extrinsic Motivation

▪ Intrinsic Motivation
Extrinsic Motivation
Behaviors that are reinforced
through the use of rewards
that are not inherent in the
activity

▪ e.g., praise, money, stickers,

candy, etc…
▪ People have less interest in
the task itself
▪ Motivation only lasts as
long as the reward does
Intrinsic Motivation

Behaviors that occur for no

notable reason beyond the task
itself

▪ They do it for the “passion of

the business”
▪ Doesn’t have to be one or
the other
 David McClelland,
Psychologist
(1917-98)
Needs-based
Entrepreneurial
Motivation

David McClelland, Psychologist (1917-98)

Entrepreneurial Motivation Theories

McClelland’s Three Need Model:
At least three general categories of social motives as
important determinant of human behavior:
▪ The need for achievement (n Ach)
▪ Achievement motive - drive to do well, strive for
excellence and overcome challenges and obstacles in the
pursuit of goal.
▪ The need for Power (n Pow)
▪ Power motive - drive to control, influence and to have
impact on others and change the situations.
▪ The need for affiliation (n Aff)
▪ Affiliation motive - drive to establish, maintain or renew
affective relationship with others.

Entrepreneurial Motivation Theories

Entrepreneurial Motivation

McClelland’s Three Need Model:

▪ All three motives may exist together in a person

▪ But one usually more dominant than the other motives

for most of the individual’s actions.
High need for achievement (high n Ach)

▪ High need for achievement

(high n Ach) has been identified
as the critical motive that
influence for most of venture
creation and entrepreneurship.
▪ Individual with high need for
achievement found in most
good business founder.
▪ Need for achievement also
known as urge to improve.
High need for power (high n Pow)

▪ Individual with High need

for power (high n Pow)
normally seek position of
leadership.
▪ They potentially to be good
managers, executive or
supervisors.
Need for affiliation (n Aff)

▪ High need for affiliation (n Aff) has

mostly been associated with
individual whose desire in life is to
establish, maintain or renew
affective relationship with others.
▪ They potentially to be good social
workers
▪ As an entrepreneur the need for
affiliation to certain extent may
contribute to the drive for
maintaining effective business
networking.
 David McClelland,
Psychologist
(1917-98)
Maslow's
hierarchy of needs

Abraham Maslow, Psychologist (1908-70)

Entrepreneurial Motivation Theories

Entrepreneurial Motivation Theories

Maslow Need Hierarchy Theory:

➢ Based on human needs.

➢ Strong needs of an individual dominates the other

needs.

➢ The second need does not arise till the first need is
satisfied i.e. needs have a definite sequence of
domination
 Basic Human Needs
• Food
• Air
• Water
• Sleep
• Clothing
Physiological Needs
 Safety and Security
◆ Protection
◆ Stability
◆ Pain Avoidance
◆ Routine/Order
Safety Needs
 Love and Belonging
◆ Affection
◆ Acceptance
Social Needs ◆ Inclusion
 Esteem
Esteem Needs ◆ Self-Respect
◆ Self-Esteem
◆ Respected by
Others
Self-Actualization
◆ Achieve full potential
◆ Fulfillment
Any Question?