The Entrepreneurial Mind

Understanding the Entrepreneurial Perspective

UNIT 1 The Individual Entrepreneurial Mind-Set

At the end of the lesson, students should be able to:

o To describe the Entrepreneurial Mind-Set
o To present the major sources of information that are useful in
profiling the Entrepreneurial Mind-Set
o To identify and discuss the most commonly cited characteristics
found in successful entrepreneurs
o To identify and discuss the different types of risk entrepreneurs
face.

Engage:

Can anybody become an entrepreneur? Explain your answer.

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Explore:

Match the Entrepreneurs to the company they started.

Tony Tan Socorro Mariano Corazon Diosdado

Caktiong C. Ramos Que D. Ong Banatao

Author: Dr. Beverly C. Sa-ao

Facilitated by: Ms. Sherry Mae M. Daclan |Module 1
The Entrepreneurial Mind

Explain:

Entrepreneurship plays an important role in the creation and growth of businesses, as

well as in the growth and prosperity of regions and nations. Entrepreneurial opportunities are
those situations where new goods, services and processes are introduced and sold to the
market for profit. For instance, when someone introduces a new product in the market like
a medicine that can cure cancer, or the introduction of a new technological process that can
assist teachers and students in their online learning. However, entrepreneurial opportunities
do not only refer to the introduction of new products and ideas, it can also be the introduction
of an old product improved with a particular change or twist in the product, like the well-
known pinoy pandesal that was transformed into an ube pandesal with cheese, which became
popular during the quarantine period. However, opportunities cannot exist in a vacuum,
entrepreneurship requires action— entrepreneurial action through the creation of new
products/processes and/or the entry into new markets, which may occur through a newly
created organization or within an established organization. For such organizations to function
and be successful, it will require specific expertise from people, particularly from
entrepreneurs.

Entrepreneurs act on the possibility that one has identified an opportunity worth
pursuing. Opportunities are not definite, one does not exactly know whether the opportunity
will usher in success or failure. Doubt can challenge entrepreneurial action, therefore an
entrepreneur must know how to identify and assess the risks involved in taking action. The
individual’s prior knowledge can decrease the amount of uncertainty, and his or her
motivation indicates a willingness to bear uncertainty.

Entrepreneurial action involves entrepreneurial thinking—individuals’ mental

processes of overcoming ignorance to decide whether a signal represents an opportunity for
someone and/or reducing doubt as to whether an opportunity for someone is
also an opportunity for them specifically, and/or processing feedback from action steps
taken. According to Peter Drucker, some people are born with an entrepreneurial mind-set
while others can develop it. This mind-set can be exhibited inside or outside an organization,
in profit or non-profit enterprises and in business or non-business activities for the purpose
of bringing forth creative ideas. Thus entrepreneurship is an integrated concept that
permeates an individual’s enterprise in an innovative manner. It is this mind-set that has
revolutionized the way business and social ventures are conducted at every level and in every
country.
To explain these processes more fully, we now turn to different forms of
entrepreneurial thinking.

HOW ENTREPRENEURS THINK

One of the hottest topics in the research literature is entrepreneurial cognition:

entrepreneurs actually think differently from other people. In science, cognition refers to
mental processes, including attention, remembering, producing and understanding language,
solving problems and making decisions. It means the ability to process information, apply
knowledge and change preferences. Social cognition theory looks at situation-based mental
Author: Dr. Beverly C. Sa-ao
Facilitated by: Ms. Sherry Mae M. Daclan |Module 1
The Entrepreneurial Mind

models (cognitions) that optimize personal effectiveness. Mitchell et al. define

entrepreneurial cognition as the knowledge structures that people use to make assessments,
judgements, or decisions involving opportunity evaluation, venture creation, and growth.
Entrepreneurs use simplifying mental models to piece together previously unconnected
information that helps them to identify and invent new products or services, and to assemble
the necessary resources to start and grow businesses.

Consider the entrepreneur challenged to give a sound explanation for a new venture
to a venture capitalist. Even before evaluating alternative strategies, the entrepreneur must
first formulate a strategy to frame how he or she will ‘think’ about this task.

Entrepreneurs think differently from non-entrepreneurs. Moreover, an entrepreneur

in a particular situation may think differently from when faced with some other task or
decision environment. Entrepreneurs must often make decisions in highly uncertain
environments where the stakes are high, time pressures are immense, and there is
considerable emotional investment. We all think differently in these strained environments
than we do when the nature of a problem is well understood and we have time and rational
procedures at hand to solve it.

Psychologists have put together a set of profile dimensions that characterize

entrepreneurs.

1. DETERMINATION AND PERSEVERANCE

More than any other factor, total dedication to success and focus on advantage can
overcome obstacles and setbacks. Sheer determination and a stubborn, unwavering
commitment to succeed often wins out against odds that many people would consider
insurmountable. These characteristics can also compensate for personal shortcomings
although when a venture faces adversity, entrepreneurs who value such things as openness
to change and the non-financial benefits of a business (rather than money) are also prone to
making decisions to persist, ignoring objective data, ultimately leading to failure. Potential
investors or angels take the measure of entrepreneurial determination. Is the entrepreneur
willing to mortgage their own house, take a pay-cut, sacrifice family time and reduce their
standard of living for long-term gain?

2. DRIVE TO ACHIEVE
Entrepreneurs are self-starters who appear to others to be internally driven by a
strong desire to compete, to excel against self-imposed standards and to pursue and attain
challenging goals. This drive to achieve has been well documented in the entrepreneurial
literature beginning with David McClelland’s pioneering work on motivation in the 1950s and
1960s. McClelland suggested that the key to entrepreneurial behavior lies in the need to
achieve. High achievers take calculated risks. They examine a situation, determine how to
increase the odds of winning and then push ahead. A high-risk decision for the average
businessperson is often perceived as a moderate risk decision for the well-prepared high
achiever.

Author: Dr. Beverly C. Sa-ao

Facilitated by: Ms. Sherry Mae M. Daclan |Module 1
The Entrepreneurial Mind

3. OPPORTUNITY ORIENTATION
One clear pattern among successful, growth-minded entrepreneurs is their focus on
opportunity rather than on resources, structure or strategy. Opportunity orientation is the
constant awareness of the opportunities that exist in everyday life. Successful entrepreneurs
start with the opportunity and let their understanding of it guide other important issues. They
are goal-oriented in their relentless pursuit of opportunities. Setting high but attainable goals
enables them to focus their energies selectively to sort out opportunities and to know when
to say ‘no’. Their goal orientation also helps them to define priorities and provides them with
measures of how well they are performing.

4. PERSISTENT PROBLEM SOLVING

Entrepreneurs are not intimidated by difficult situations. In fact, their self-confidence
and general optimism seem to translate into a view that the impossible just takes a little
longer. Yet they are neither aimless nor foolhardy in their relentless attack on a problem or
an obstacle that is impeding business operations. If the task is extremely easy or is unsolvable,
entrepreneurs often will give up sooner than others. Simple problems bore them; unsolvable
ones do not warrant their time. Moreover, although entrepreneurs are extremely persistent
they are realistic in recognizing what they can and cannot do and where they can get help in
solving difficult but unavoidable tasks.

5. SEEKING FEEDBACK
Effective entrepreneurs are often described as quick learners. Unlike many people,
however, they also have a strong desire to know how well they are doing and how they might
improve their performance. In attempting to make these determinations, they actively seek
out mentors and use their feedback. Feedback is also central to their learning from their
mistakes and setbacks.

6. INTERNAL LOCUS OF CONTROL

Successful entrepreneurs believe in themselves. They do not believe the success or
failure of their venture will be governed by fate, luck or similar forces. They believe their
accomplishments and setbacks are within their own control and influence and that they can
affect the outcome of their actions. This attribute is consistent with a high-achievement
motivational drive, the desire to take personal responsibility and self-confidence.

7. TOLERANCE FOR AMBIGUITY

Start-up entrepreneurs face uncertainty multiplied by constant change. This
introduces ambiguity and stress into every aspect of the enterprise. Setbacks and surprises
are inevitable; lack of organization, structure and order is a way of life. Yet successful
entrepreneurs thrive on the fluidity and excitement of such an ambiguous existence and
generally have a high tolerance for ambiguity. Job security and retirement generally are of no
concern to them.

8. CALCULATED RISK TAKING

Successful entrepreneurs are not gamblers – if they decide to participate in a venture,
they do so in a very calculated, carefully thought-out manner. They do everything possible to
get the odds in their favor and they often avoid taking unnecessary risks. These strategies
include getting others to share inherent financial and business risks with them – for example,
Author: Dr. Beverly C. Sa-ao
Facilitated by: Ms. Sherry Mae M. Daclan |Module 1
The Entrepreneurial Mind

by persuading partners and investors to put up money, creditors to offer special terms and
suppliers to advance merchandise.

9. TOLERANCE FOR FAILURE

Entrepreneurs use failure as a learning experience and generally have a high tolerance
for failure. The iterative, trial-and-error nature of becoming a successful entrepreneur makes
serious setbacks and disappointments an integral part of the learning process. They do not
become disappointed, discouraged or depressed by a setback or failure. Many believe they
learn more from their early failures than from their early successes. Entrepreneurs
differentiate between noble failure and stupid failure. Although failure can be an important
source of information for learning, this learning is not automatic or instantaneous. The
emotions generated by failure (i.e. grief) can interfere with the learning process.

10. HIGH ENERGY LEVEL

The extraordinary workloads and the stressful demands faced by entrepreneurs place
a premium on energy. Many entrepreneurs fine-tune their energy levels by carefully
monitoring what they eat and drink, establishing exercise routines and knowing when to get
away for relaxation.

11. CREATIVITY AND INNOVATIVENESS

Creativity was once regarded as an exclusively inherited trait. Looking around the
world we see that cultures differ very much in terms of creativity and innovation. Some, like
Singapore, are known less for their innovation than for their industriousness. Others, like New
Zealand, have a very strong streak of innovation running throughout the culture. It appears
likely that creativity is less a genetic trait than a cultural characteristic – one that can be
learned.

12. VISION
Entrepreneurs know where they want to go. They have a vision or concept of what
their business can be. For example, Steve Jobs, one of the founders of Apple Computer Inc.,
wanted his business to provide microcomputers that could be used by everyone from
schoolchildren to businesspeople. The computer would be more than a machine. It would be
an integral part of the person’s life in terms of learning and communicating. This vision helped
make Apple a major competitor in the microcomputer industry. However, not all
entrepreneurs have predetermined visions for their business. In many cases, this vision
develops over time as the individual begins to realize what the business is and what it can
become.

13. PASSION
Entrepreneurial passion is a fundamental emotional experience for entrepreneurs.
Cardon (2005, as cited by Kuratko, 2016) has devoted much of her efforts on examining this
element of the entrepreneurial mind-set. She has found that entrepreneurial passion is an
expression constructed by the entrepreneur to provide a coherent understanding to an
emotional experience of intense arousal and energy mobilization involving an entrepreneur
and his or her venture. Moreover, entrepreneurial passion is characterized by a discrete
emotion that is quite intense, having been described as an underlying force that fuels our
strongest emotions, or the intensity felt when engaging in activities that are of deep interest,
Author: Dr. Beverly C. Sa-ao
Facilitated by: Ms. Sherry Mae M. Daclan |Module 1
The Entrepreneurial Mind

or the energy that enables entrepreneurs to achieve peak performance. Thus,

entrepreneurial passion is recognized as a fundamental component of the entrepreneurial
mind-set.

14. TEAM-BUILDING
The desire for recognition and autonomy does not preclude the entrepreneur’s desire
to build a strong entrepreneurial team. Successful entrepreneurs need to have highly
qualified, well-motivated teams that help handle the venture’s growth and development.
Teams with past experience together can have an even stronger effect on the new venture’s
survival and successful growth. In fact, although the entrepreneur may have the clearest
vision of where the business is (or should be) headed, the personnel are often more qualified
to handle day-to-day implementation challenges.

While these are likely an incomplete list of characteristics identified as

entrepreneurial, they do provide an important backdrop for the discussion of the
entrepreneurial mind. Importantly, they cannot always identify who is and who is not an
entrepreneur. At best, they serve as a guide and no single entrepreneur exhibits all traits.

Regardless, human curiosity drives many of us and at the end of this chapter you will
find an Experiencing Entrepreneurship link to an entrepreneurial assessment. Use it to
understand your own strengths and weaknesses and then set about finding ways to
compensate for weaknesses and capitalize on strengths.

Elaborate:

Accomplish the PEC- Self-Rating Questionnaire, submit to me the summary table of PEC Scores,
the PEC Profile Sheet and a brief discussion of the PEC Profile Sheet.

THE INTENTION TO ACT ENTREPRENEURIALLY

Entrepreneurial action is most often intentional. Entrepreneurs intend to pursue

certain opportunities, enter new markets, and offer new products—and this is rarely the
process of unintentional behavior. Intentions capture the motivational factors that influence
a behavior; they are indications of how hard people are willing to try and how much of an
effort they are planning to exert to perform the behavior. As a general rule, the stronger the
intention to engage in a behavior, the more likely should be its performance. Individuals have
stronger intentions to act when taking action is perceived to be feasible and desirable.
Entrepreneurial intentions can be explained in the same way. The perception of feasibility has
much to do with an entrepreneurial self-efficacy.
Entrepreneur’s self-efficacy refers to the conviction that one can successfully execute
the behavior required; people who believe they have the capacity to perform (high self-
efficacy) tend to perform well. Thus, it reflects the perception of a personal capability to do a
particular job or set of tasks. High self-efficacy leads to increased initiative and persistence
and thus improved performance; low self-efficacy reduces effort and thus performance.
Author: Dr. Beverly C. Sa-ao
Facilitated by: Ms. Sherry Mae M. Daclan |Module 1
The Entrepreneurial Mind

Indeed, people with high self-efficacy think differently and behave differently than people
with low self-efficacy. Self-efficacy affects the person’s choice of action and the amount of
effort exerted.

Entrepreneurship scholars have found that self-efficacy is positively associated with

the creation of a new independent organization. Not only must an individual perceive
entrepreneurial action as feasible for entrepreneurial intention to be high, the individual must
also perceive this course of action as desirable. Perceived desirability refers to an individual’s
attitude toward entrepreneurial action—the degree to which he or she has a favorable or
unfavorable evaluation of the potential entrepreneurial outcomes. For example, creative
actions are not likely to emerge unless they produce personal rewards that are perceived as
relatively more desirable than more familiar behaviors.

ENTREPRENEUR BACKGROUND AND CHARACTERISTICS

Education
Although some may feel that entrepreneurs are less educated than the general
population, research findings indicate that this is clearly not the case. Education is important
in the upbringing of the entrepreneur. Its importance is reflected not only in the level of
education obtained but also in the fact that it continues to play a major role in helping
entrepreneurs cope with the problems they confront. Although a formal education is not
necessary for starting a new business—as is reflected in the success of such high school
dropouts as Andrew Carnegie, William Durant, Henry Ford, and William Lear—it does provide
a good background, particularly when it is related to the field of the venture. For example,
entrepreneurs have cited an educational need in the areas of finance, strategic planning,
marketing (particularly distribution), and management. The ability to communicate clearly
with both the written and the spoken word is also important in any entrepreneurial activity.

Age
The relationship of age to the entrepreneurial career process also has been carefully
researched. In evaluating these results, it is important to differentiate between
entrepreneurial age (the age of the entrepreneur reflected in his or her experience) and
chronological age (years since birth). Entrepreneurial experience is one of the best predictors
of success, particularly when the new venture is in the same field as the previous business
experience. In terms of chronological age, most entrepreneurs initiate their entrepreneurial
careers between the ages of 22 and 45.

Work History
Work history can influence the decision to launch a new entrepreneurial venture, but
it also plays a role in the growth and eventual success of the new venture. While
dissatisfaction with various aspects of one’s job—such as a lack of challenge or promotional
opportunities, as well as frustration and boredom—often motivates the launching of a new
venture, previous technical and industry experience is important once the decision to launch
has been made. Experience in the following areas is particularly important: financing, product
or service development, manufacturing, and the development of distribution channels.

Author: Dr. Beverly C. Sa-ao

Facilitated by: Ms. Sherry Mae M. Daclan |Module 1
The Entrepreneurial Mind

STRESS AND THE ENTREPRENEUR

Some of the most common entrepreneurial goals are independence, wealth and work
satisfaction. Research studies of entrepreneurs show that those who achieve these goals
often pay a high price. A majority of entrepreneurs surveyed had back problems, indigestion,
insomnia or headaches. To achieve their goals, however, these entrepreneurs were willing to
tolerate these effects of stress. For them, the rewards justified the costs.

WHAT IS ENTREPRENEURIAL STRESS?

In general, entrepreneurial stress can be viewed as a function of discrepancies
between a person’s expectations and ability to meet demands, as well as discrepancies
between the individual’s expectations and personality. If a person is unable to fulfil role
demands, stress occurs. When entrepreneurs’ work demands and expectations exceed their
abilities to perform as venture initiators, they are likely to experience stress. One researcher
has pointed out how entrepreneurial roles and operating environments can lead to stress.
Initiating and managing a business requires taking significant risk.

THE ENTREPRENEUR’S CONFRONTATION WITH RISK

Entrepreneurs face a number of different types of risk. These can be grouped into four
basic areas: (1) financial risk, (2) career risk, (3) family and social risk and (4) psychic risk.

1. FINANCIAL RISK - In most new ventures the individual puts a significant portion of their
savings or other resources at stake, which creates a serious financial risk. This money
or these resources will, in all likelihood, be lost if the venture fails. The entrepreneur
may also be required to sign personally on company obligations that far exceed their
personal net worth. The entrepreneur is therefore exposed to personal bankruptcy.
Many people are unwilling to risk their savings, house, property and salary to start a
new business.
2. CAREER RISK - A question frequently raised by would-be entrepreneurs is whether
they will be able to find a job or go back to their old job should their venture fail. This
career risk is a major concern to managers who have a secure job with a high salary
and a good benefits package.
3. FAMILY AND SOCIAL RISK - Starting a new venture uses much of the entrepreneur’s
energy and time. Consequently, their other commitments may suffer and there is
increased family and social risk. Entrepreneurs who are married, especially those with
children, expose their families to the risks of an incomplete family experience and the
possibility of permanent emotional scars. In addition, old friends may vanish slowly
because of missed get-togethers.
4. PSYCHIC RISK - The psychic risk may be the greatest risk to the wellbeing of the
entrepreneur. Money can be replaced; a new house can be built; spouse, children and
friends can usually adapt. But some entrepreneurs who have suffered financial
catastrophes have been unable to bounce back, at least not immediately. The
psychological impact has proven too severe for them.

Author: Dr. Beverly C. Sa-ao

Facilitated by: Ms. Sherry Mae M. Daclan |Module 1
The Entrepreneurial Mind

ROLE MODELS AND SUPPORT SYSTEMS

One of the most important factors influencing entrepreneurs in their career path is
their choice of a role model. Role models can be parents, brothers or sisters, other relatives,
or other entrepreneurs. Successful entrepreneurs frequently are viewed as catalysts by
potential entrepreneurs. As one entrepreneur succinctly stated, “After evaluating Ted and his
success as an entrepreneur, I knew I was much smarter and could do a better job. So I started
my own business.” In this way, role models can provide important signals that
entrepreneurship is feasible for them. Role models can also serve in a supportive capacity as
mentors during and after the launch of a new venture. An entrepreneur needs a strong
support and advisory system in every phase of the new venture. This support system is
perhaps most crucial during the start-up phase, as it provides information, advice, and
guidance on such matters.

Moral-Support Network

It is important for each entrepreneur to establish a moral-support network of family

and friends—a cheering squad. This cheering squad plays a critical role during the many
difficult and lonely times that occur throughout the entrepreneurial process. Most
entrepreneurs indicate that their spouses are their biggest supporters and allow them to
devote the excessive amounts of time necessary to the new venture. Friends also play key
roles in a moral-support network. Not only can friends provide advice that is often more
honest than that received from other sources, but they also provide encouragement,
understanding, and even assistance. Entrepreneurs can confide in friends without fear of
criticism. Finally, relatives (children, parents, grandparents, aunts, and uncles) also can be
strong sources of moral support, particularly if they are also entrepreneurs. As one
entrepreneur stated, “The total family support I received was the key to my success. Having
an understanding cheering squad giving me encouragement allowed me to persist through
the many difficulties and problems.”

Professional-Support Network

In addition to encouragement, the entrepreneur needs advice and counsel throughout

the establishment of the new venture. This advice can be obtained from a mentor, business
associates, trade associations, or personal affiliations—all members of a professional support
network. Most entrepreneurs indicate that they have mentors. How does one find a mentor?
This task sounds much more difficult than it really is. Since a mentor is a coach, a sounding
board, and an advocate—someone with whom the entrepreneur can share both problems
and successes—the individual selected needs to be an expert in the field. An entrepreneur
can start the “mentor-finding process” by preparing a list of experts in various fields—such as
in the fundamental business activities of finance, marketing, accounting, law, or
management—who can provide the practical “how-to” advice needed.

Author: Dr. Beverly C. Sa-ao

Facilitated by: Ms. Sherry Mae M. Daclan |Module 1
The Entrepreneurial Mind

SUSTAINABLE ENTREPRENEURSHIP

Sustainable development is perhaps the most important issue of our time, and
entrepreneurship can have a positive impact on this issue. That is, entrepreneurial action can
help us both sustain and develop. Specifically, sustainable entrepreneurship is focused on
preserving nature, life support, and community (sustainability) in the pursuit of perceived
opportunities to bring future products, processes, and services into existence for gain
(entrepreneurial action) where gain is broadly construed to include economic and
noneconomic benefits to individuals, the economy, and society (development).

Evaluate:

Reflection: If for instance, you would like to be an entrepreneur someday, what are
the characteristics you possess that can help you become successful?
(Instead of enumerating your characteristics, you will showcase it in a photo essay.
You may take your own picture portraying the identified characteristics or use old
photos or you may also copy pictures from the internet. Arrange the pictures in a
collage, organized as you wish. Make sure the collage is just enough to fill a short
bond paper.)

Author: Dr. Beverly C. Sa-ao

Facilitated by: Ms. Sherry Mae M. Daclan |Module 1