Saint Louis College

City of San Fernando, 2500 La Union

College of Commerce, Secretarial and Accountancy

LECTURE NOTES IN

ENTREPRENEURIAL BEHAVIOR
AND COMPETENCIES

MR. RUEL JOSEPH V. BALABA

COURSE FACILITATOR

Lesson 1: ENTREPRENEURIAL BEHAVIOR AND PERSONALITY

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There are many different definitions of entrepreneur as well as the concept of entrepreneurship.
Researchers and writers often describe entrepreneurs as unique individuals who have a sense of
independence and are innovative and calculative risk-takers. Many researchers have battled to
find out the accurate ways and means to be a successful entrepreneur; on their personality, skills,
attitude, and behavior. People have explicitly linked entrepreneurship to the capability of
exploiting successfully innovative ideas in a commercially competitive market. They study the
technical and trivial concepts of how an entrepreneur could acquire knowledge in managing,
sustaining, and making an entrepreneurial entity productive. However, people must also dig
deeper into a more personal perspective on what makes a person a successful entrepreneur.

LESSON OBJECTIVES:

By the end of the lesson the students must be able to:

• Understand the role of an entrepreneur’s behavior towards goal achievement;
• Recognize the importance of understanding oneself in analyzing circumstances surrounding an
entrepreneur’s success and failure; and
• Determine the behavior and personality types that most entrepreneurs possess that led them to
success in the field of entrepreneurship.

Entrepreneurial Behavior

Entrepreneurial behavior is one of two behavioral alternatives underlying the desire to undertake
innovations and to change the status quo. The other is managerial behavior. Entrepreneurial
behavior embraces innovation, is motivated to seek changes in the status quo, and draws
satisfaction from institutional changes. In contrast, managerial behavior is a preference for
maintaining the status quo.

Entrepreneurial behavior includes the goal-oriented acts or decisions of an entrepreneur. It is how

the entrepreneur deals with its environment, both internal and external. It is the way or approach
to look at the physical and human resources and the society.

CHARACTERISTICS OF ENTREPRENEURIAL BEHAVIOUR

(1) Initiative Behavior: It is the entrepreneur who takes initiative towards setting up an
enterprise. An entrepreneur is an innovator who carries out new combinations to initiate and
accelerate the process of economic development.

(2) Challenge-accepting Behavior: Entrepreneurs take problems as a challenge and do their best
to find the most appropriate solution. Along with the characteristic of being a risk-taker, they
are willing to put themselves on the limit and test their ability by facing challenges.

(3) Assertive Behavior: An assertive person knows what to say when to say it, how to say it,
and whom to say it. He believes in his abilities and ensures that others fall in line with his
thinking, aimed at promoting the interests of the organization.

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(4) Persuasive Behavior: A successful entrepreneur can persuade people through sound
arguments and logical reasoning. By being able to communicate well, they were able to persuade
others to do as they said.

(5) Effective Monitoring: Entrepreneurs ensure that everything is carried out in their
organizations as per their wishes. They ensure regular monitoring of the work so that the goals of
the organization are achieved in the best possible manner.

(6) Looking for Opportunity: An entrepreneur is always on the lookout or searching for
opportunity and is ready to exploit it in the best interests of the organization.

(7) Persistence: An entrepreneur is never disheartened by failures. He believes in the Japanese

proverb ‘fall seven times, stand up eight’. He follows Try-Try Again to overcome the obstacles
that come in the way of achieving goals.

(8) Information Seeker: A successful entrepreneur always keeps his eyes and ears open and is
receptive to new ideas that can help him realize his goals.

(9) Quality Consciousness: Successful entrepreneurs do not believe in moderate or average

performance. They set high-quality standards for themselves and then put in their best to achieve
these standards. They believe in excellence, which is reflected in everything they do.

(10) Recognizing the importance of Business Relationships: The entrepreneur acts to build
rapport not only with customers and business partners but also among his employees. He sees
interpersonal relationships as a fundamental business resource. He places long-term goodwill
over short-term gain.

(11) Commitment to Work: Successful entrepreneurs are prepared to make all sacrifices to
honor the commitments they have made. Whatever they commit, they take it as a moral
binding for honoring their commitments, irrespective of the costs involved.

(12) Independent Behavior: Entrepreneurial behavior possesses a strong need for independence
and due to this desire they are motivated to start a business. They always concentrate on
achieving their goals.

The behavior of an entrepreneur is dependent largely on his psychology and motives which
are the main determinants of behavior. These motives are based on needs for survival and
growth. The movements of an entrepreneur are affected by the psychological background. Many
theorists Akouri, McClelland, Javillionar & Winter have given views related to
psychological factors as follows:

(1) Achievement Motive: Achievement motive is most important for an entrepreneur. It is this
motive which motivates people to do something different and extraordinary so that one may feel
that he has achieved or created something which others are not able to do. It motivates an
entrepreneur to take an initiative for innovation. It also makes one personally responsible for his

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actions and performances. It helps to develop self-reliance and develops the spirit of risk-taking
which is very -an essential part of entrepreneurial behavior.

(2) Desire to Influence Others: A strong desire of the need for power, helps a person to become a
successful institution builder, thus, an entrepreneur must have the ability of self-management
with a strong will power. They possess a strong desire towards the need of influencing
others.

(3) Desire for Independence: Entrepreneur possesses a strong desire for independence and it is
due to this desire that they are motivated to start a new business.

(4) Innovation: Entrepreneurs transform creative ideas into useful applications. According to
Schumpeter, a person is an entrepreneur only when he is engaging himself in an innovative
behavior. Thus, innovative behavior is an entrepreneurial behavior,

(5) Hope for Success: Entrepreneurs are always hopeful for future success. The hope on
achieving success enlightens them with the confidence, a positive attitude, and high energy level.
Hope for success makes their behavior strong and stable.

(6) Calculated Risk Taking: Basically, entrepreneurs are risk takers. It is natural since innovation
is almost synonymous with new ideas or products, and these new things bring change which
always accompanies risk. Entrepreneurs don’t just approve new ventures for the sole sake of
innovation, they also calculate whether it is feasible or not.

(7) Immediate Feedback: Entrepreneur The entrepreneur wants immediate feedback of the
progress of his entrepreneurial targets so that he can improve the way of achieving the targets.

(8) Self-Efficacy: An entrepreneur has a drive for self-efficacy. They believe in their capacity to
innovate and solve things.
(9) Self-Expression: They are expressive about their thoughts and ideas. They are not afraid to
voice out their opinions and views about how things should be.

(10) Self-Confidence: Entrepreneurs believe in themselves. They tend not to accept the status
quo, believing instead that they can change the facts. Often, they insist the odds are better than
the facts would justify. They have winning habits.

Entrepreneurial Personality

Personality, as defined by Oxford dictionary, is the combination of characteristics or

qualities that form an individual’s distinct character. Personality traits include the human
characteristics, abilities, motives, attitudes and values which shape the individual person's
experiences and actions. Hence, personality traits cause the mental and behavioral processes of
individuals. The Big Five model has been the predominant system to describe a human
personality. The Big Five personality traits are commonly known under the acronym "OCEAN"
and consist of openness to experience, conscientiousness, extraversion, agreeableness and
neuroticism. Each of these dimensions consists of a set of related qualities.

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The human's psychology and personality aspects might play a significant role in the
individual propensity towards entrepreneurial actions. In his meta-analysis, Brandstätter (2011)
assessed the correlation between personality traits and entrepreneurial behavior. He explored the
personality traits of entrepreneurs by comparing personality scores of those with the scores of
managers. It was found that while being more open to new experiences (openness),
entrepreneurs are also slightly more dutiful (conscientiousness) and rather energetic towards the
social and material world (extraversion) compared to managers. At the same time entrepreneurs
tend to score lower in agreeableness and neuroticism. This suggests that there is an
entrepreneurial personality (Kahlert, 2015).

MODELS OF ENTREPRENEURIAL BEHAVIOR

Based on the personality type of the Entrepreneur, there are five models that he/she can possibly
exhibit:

1. Autocratic model

Autocratic model is the model that depends upon strength, power and formal authority. In an
autocratic organization, the entrepreneurs who manage the tasks in an organization have formal
authority for controlling the employees who work under them. These lower-level employees
have little control over the work function. Their ideas and innovations are not generally
welcomed, as the key decisions are made at the top management level.

The guiding principle behind this model is that management/owners have enormous business
expertise, and the average employee has relatively low levels of skill and needs to be fully
directed and guided. This type of autocratic management system was common in factories in the
industrial revolution era.

One of the more significant problems associated with the autocratic model is that the
management team is required to micromanage the staff – where they have to watch all the details
and make every single decision. Clearly, in a more modern-day organization, where highly paid
specialists are employed, an autocratic system becomes impractical and highly inefficient.

The autocratic model is also a detractor to job satisfaction and employee morale. This is
because employees do not feel valued and part of the overall team. This leads to a low-level of
work performance. While the autocratic model might be appropriate for some much automated
factory situations, it has become outdated for most modern-day organizations.

2. Custodial model

The custodial model is based around the concept of providing economic security for
employees – through wages and other benefits – that will create employee loyalty and
motivation. In some countries, many professional companies provide health benefits, corporate
cars, financial packaging of salary, and so on – these are incentives designed to attract and retain
quality staff.

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The underlying theory for the organization is that they will have a greater skilled workforce,
more motivated employees, and have a competitive advantage through employee knowledge
and expertise. One of the downsides with the custodial model is that it also attracts and retains
low performance staff as well. Or perhaps even deliver a lower level of motivation from some
staff who feel that they are “trapped” in an organization because the benefits are too good to
leave.

3. Supportive model

Unlike the two earlier approaches, the supportive model is focused around aspiring
leadership. It is not based upon control and authority (the autocratic model) or upon incentives
(the custodial model), but instead tries to motivate staff through the manager-employee
relationship and how employees are treated on a day-to-day basis. Quite opposite to the
autocratic model, this approach states that employees are self-motivated and have value and
insight to contribute to the organization, beyond just their day-to-day role.

The intent of this model is to motivate employees through a positive workplace where their ideas
are encouraged and often adapted. Therefore, the employees have some form of “buy-in” to the
organization and its direction.
4. Collegial model

The collegial model is based around teamwork – everybody working as colleagues (hence the
name of the model). The overall environment and corporate culture need to be aligned to this
model, where everybody is actively participating – is not about status and job titles – everybody
is encouraged to work together to build a better organization.

The role of the manager is to foster this teamwork and create positive and energetic
workplaces. In much regard, the manager can be considered to be the “coach” of the team. And
as coach, the goal is to make the team perform well overall, rather than focus on their
own performance, or the performance of key individuals.

The collegial model is quite effective in organizations that need to find new approaches –
marketing teams, research and development, technology/software – indeed anywhere the
competitive landscape is constantly changing and ideas and innovation are key
competitive success factors.

5. System model

The final organizational model is referred to as the system model. This is the most
contemporary model of the five models discussed. In the system model, the organization looks at
the overall structure and team environment, and considers that individuals have different
goals, talents and potential.

The intent of the system model is to try and balance the goals of the individual with the goals of
the organization. Individuals obviously want good remuneration, job security, but also want to

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work in a positive work environment where the organization adds value to the community and/or
its customers. The system of model should be an overall partnership of managers and employees
with a common goal, and where everybody feels that they have a stake in the organization.

RESOURCES:
• Entrepreneurial Behavior, AmosWEB Encyclonomic WEB*pedia,
http://www.AmosWEB.com , AmosWEB LLC, 2000-2020
• Open Text Book (2011), Entrepreneurial Behavior: Transforming an Innovative Idea into an
Entrepreneurial Product

Lesson 2: THE BASIS OF ENTREPRENEURIAL BEHAVIOR

Undeniably, entrepreneurs play an important role in the growth of the society. They are agents of
economic transformation in terms of employment and wealth generation. They also bring
technology by introducing innovative products to the market. Several studies are bent to discover
the background on how entrepreneurs perform and behave the way they do. In understanding
what qualities and skills that entrepreneurs need to possess, researchers tried first to understand
the psychological foundation of why entrepreneurs act or behave the way they do.

LESSON OBJECTIVES:
By the end of the lesson, the students must be able to:
• Determine the psychological foundation of Entrepreneurial Behavior;
• Understand the nature of entrepreneurship and the function of the entrepreneur in the
successful, commercial application of innovations; and
• Identify the different ways in which entrepreneurship can clearly see themselves in various
business situations.

Main Points to Consider in Understanding Entrepreneurial Behavior

Entrepreneurial behavior is one of the two behavioral alternatives underlying the desire to
undertake innovations and to change the status quo. The other is managerial behavior.
Entrepreneurial behavior embraces innovation, is motivated to seek changes in the status quo,
and draws satisfaction from institutional changes. In contrast, managerial behavior is a
preference for maintaining the status quo.

The underlying source of entrepreneurial behavior is a relative preference for novel

information over redundant information. Both types of information are important to the fight or
flight response to a threat. Novel information reveals potential threats that results in automatic
physiological responses, which is more satisfying to some than it is to others.

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Entrepreneurial behavior is a preference for innovation and a change in existing

institutions and the status quo. It can be as simple as the willingness to buy a new electronic
gadget or as involved as rebelling against the existing political regime and starting a new nation.
It often surfaces in the form of an entrepreneur undertaking the risk of organizing production and
launching a new business venture.

Fight or Flight

An understanding of entrepreneurial behavior requires a look at the fundamental, physiological

response to potential threat, which is called fight or flight. The human body automatically
prepares itself to fight off a potential threat to flee away from it. Respiration increases. Pupils
dilate. Brain wave activity increases. Adrenalin is pumped through the body. Heart rate increases.
The human body is primed and ready to recognize the threat and to respond.

The key to this automatic response is achieved by distinguishing between what's new and
different and what's old and familiar. The old and familiar is less threatening that the new and
different. The human brain sorts between two different types of information that comes through
the five senses (sight, hearing, touch, taste, and smell), attempting to discern the potential for
danger -- novel information and redundant information.

• Novel: This is new information. An unusual sight. A strange sound. An unexpected touch. A
bizarre taste. An uncommon smell. The human brain takes immediate note of this information.
Because it is unfamiliar, it might be threatening. This is information that needs to be identified
quickly. It needs to stand out from the ordinary and familiar. A self-preservation reaction (fight or
flight) might be needed.

• Redundant: This is familiar information. A common sight. A routine sound. A ordinary

touch. A recognized taste. An everyday smell. The human brain is wired to largely ignore this
information. Because it is familiar, it is not threatening. It is the background canvas upon which
novel information is displayed.

Redundant and novel information are both intrinsically satisfying. Nothing but redundant
information is incredibly boring and not particularly satisfying. And nothing but novel
information is anxiety inducing, and also not very satisfying. Too much of one or the other is
not a pleasant situation. A combination of the two is most enjoyable. It can maximize
satisfaction.

However, different people have different preferences over the proper mix of novel and redundant
information. Some prefer relatively more new and less old. Others prefer relatively older and less
new.

These individual differences give rise to entrepreneurial and managerial behavior. Those who
prefer relatively more redundant information and relatively less novel information tend to pursue
managerial behavior. Others who prefer relatively more novel information and relatively less
redundant information tend to pursue entrepreneurial (and innovative) behavior.

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A Preference for Change

Entrepreneurial behavior is a preference for changing the status quo over maintaining it.
Entrepreneurial types embrace innovation. A change in institutions generates satisfaction for the
entrepreneurially inclined. Keeping things structured and orderly is not nearly as
satisfying. Entrepreneurial behavior has a relative preference for novel information over
redundant information.

Entrepreneurial behavior surfaces in a number of ways throughout society:

• Entrepreneurship: One notable manifestation of entrepreneurial behavior is

entrepreneurship, the scarce resource that undertakes the risk of organizing production. In many
cases, not all but many, entrepreneurs are motivated by the desire to produce something new, to
change the status quo. Entrepreneurship might be engaged in the innovation of a new
product. It might be utilizing a different method of production or marketing. However, it's also
possible that the entrepreneur is doing nothing more than launching a new business to sell an
existing product using existing production techniques. Nothing new, nothing novel, no change in
the status quo.

• Innovation: Entrepreneurial behavior is also key to innovation, the process of applying

and disseminating new products, ideas, and institutional changes throughout society. The
entrepreneurial desire for change goes hand in hand with the innovation process. It's seen
both with those who initially launch the innovations (the sellers) as well as those who are first
to adopt the innovations (the buyers). Both sides need the inclination to change the status
quo to be part of the innovation process.

• Invention and Creation: The starting point for most innovation is invention, the act of creating
the something new. The invention is perhaps the purest form of entrepreneurial behavior.
Creating something new just for the sake of creating something new. The act of invention
includes the standard creation of a new product (think a device that automatically ties your shoe
strings), as well as the creation of a new idea, scientific theory, painting, poem, song, novel,
computer program, or video game. Many artists, writers, musicians, and computer
programmers have a strong entrepreneurial inclination.

• Life: Entrepreneurial behavior also surfaces in assorted nonspecific actions that make up
daily life. The desire to periodically take a new route to work is an example. Another is the
compunction to rearrange furniture. A third example is to occasionally try a different restaurant
or sample a new cuisine. The changes can be seemingly trivial parts of an otherwise unchanging
status quo life.

The Managerial Alternative

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The alternative to
entrepreneurial behavior is
managerial behavior.
Managerial behavior
is a preference for
maintaining the status quo
over changing it. Managerial
types resist
innovation. A change in
institutions does not generate
satisfaction. On the contrary,
satisfaction
is best achieved from keeping
things structured and orderly.

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Managerial behavior displays

a
relative preference for
redundant information over
novel information.
This behavioral alternative is
well suited for keeping an
existing business running
smoothly
and efficiently. As the name
suggests, managerial types are
inclined to manage, to
administer, to
apply existing rules and
procedures. They are not
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absolutely opposed to change,

but the change
needs to be orderly and within
the rules.
While managerial behavior is
not conducive to creating an
invention or launching an
innovation throughout society,
once the innovation has taken
hold and becomes part of the
fabric
of society, it takes hold. It
promotes the now "old"
innovation, getting the most
benefit possible.
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Those who are managerial

inclined might not favor
product innovations (new
products), but
process innovations (new ways
of making existing products) are
acceptable.
A Continuum
Like much of life, the
inclination toward managerial
or entrepreneurial behavior is
seldom
one or the other. Most people
have a combination of each and

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few exhibit either in the

extreme
or in all aspects of their lives.
One person might be
entrepreneurial in business, but
managerial
at home. Another person
might be just the opposite.
Each might fulfill the desire
for in one
activity, then be satisfy with the
status quo in other activities
The Basis of Entrepreneurial
Behavior

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Broadly, entrepreneurs have

two vital roles to play in the
economy: (1) to introduce new
ideas and, (2) to energize
business processes. Strictly
speaking, the term
entrepreneur, which
derives from the French words
entre (between) and prendre (to
take), referred to someone who
acted as an intermediary in
undertaking to do something.
The entrepreneur first made
an appearance as a distinct
economic concept in France,
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twenty years before the ‘father’

of economics, Adam Smith,
published his Wealth of Nations
in
1776. Richard Cantillon, an
Irishman living in France,
suggested in 1756 that the
entrepreneur was
someone prepared to bear
uncertainty in engaging in risky
arbitrage, buying goods and
The Managerial Alternative

The alternative to entrepreneurial behavior is managerial behavior. Managerial behavior is a

preference for maintaining the status quo over changing it. Managerial types resist
innovation. A change in institutions does not generate satisfaction. On the contrary, satisfaction is
best achieved from keeping things structured and orderly. Managerial behavior displays a
relative preference for redundant information over novel information.

This behavioral alternative is well suited for keeping an existing business running smoothly and
efficiently. As the name suggests, managerial types are inclined to manage, to administer, to
apply existing rules and procedures. They are not absolutely opposed to change, but the change
needs to be orderly and within the rules.

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While managerial behavior is not conducive to creating an invention or launching an

innovation throughout society, once the innovation has taken hold and becomes part of the fabric
of society, it takes hold. It promotes the now "old" innovation, getting the most benefit possible.
Those who are managerial inclined might not favor product innovations (new products),
but process innovations (new ways of making existing products) are acceptable.

A Continuum

Like much of life, the inclination toward managerial or entrepreneurial behavior is seldom one or
the other. Most people have a combination of each and few exhibit either in the extreme or in all
aspects of their lives. One person might be entrepreneurial in business, but managerial at home.
Another person might be just the opposite. Each might fulfill the desire for in one
activity, then be satisfy with the status quo in other activities

The Basis of Entrepreneurial Behavior

Broadly, entrepreneurs have two vital roles to play in the economy: (1) to introduce new ideas
and, (2) to energize business processes. Strictly speaking, the term entrepreneur, which
derives from the French words entre (between) and prendre (to take), referred to someone who
acted as an intermediary in undertaking to do something.

The entrepreneur first made an appearance as a distinct economic concept in France,

twenty years before the ‘father’ of economics, Adam Smith, published his Wealth of Nations in
1776. Richard Cantillon, an Irishman living in France, suggested in 1756 that the entrepreneur
was someone prepared to bear uncertainty in engaging in risky arbitrage, buying goods and
services at a certain (fixed) price in one market to be sold elsewhere or at another time for
uncertain future prices, usually in other market.

This concept of entrepreneur as arbitrager is still relevant today but was clearly influenced by
the dominance at that time of trade as the chief means for accumulating new wealth and
capital. Manufacturing and trade dominated Britain’s heyday in Victorian times whereas today,
as the case studies show, it is technology, knowledge and services that provide most, though by
no means all, entrepreneurial opportunities. In other words, entrepreneurship

exists in its context as follows:

The illustration shown is also known as the Business Competition Chain. Here, the role of the
entrepreneur is to conceive a business idea in terms of an innovation to be brought
successfully to the market and to find the ability to make this happen. The entrepreneur does not
necessarily need to have the design, production or delivery skills (this is the function of the firm)
nor to shoulder all or most of the risk (this is often assumed by the providers of
finance or investors). Indeed, the notion of the entrepreneur as a risk-taking trader began to be
challenged early on by the view of the entrepreneur as an adventurous self-employed manager
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capable of combining, to personal advantage, capital and labor. It is interesting to note that in
France today the entrepreneur is a more generic term mainly referring to small property
developers and owners of small construction firms. It would be wrong to state that the element
of risk-bearing has completely disappeared from the modern concept of the entrepreneur.
The successful management of risk is an important entrepreneurial attribute. However, it does
seem true that a swift perception of opportunities and the ability to coordinate the activities of
others emerge as the more central economic skills of the modern entrepreneur
(http://www.AmosWEB.com).

ENTREPRENEURSHIP THEORIES AND MODELS

Recent studies as explained by Jignesh (2017) suggest a multitude of entrepreneurial

influences, grounded on a number of theoretical paradigms. As a starting point, entrepreneurial
outcomes are viewed as lying along a continuum which separates low and high performances in
entrepreneurship, which are then envisioned to be associated with high and low barriers. The
theories of entrepreneurship are based on psychological/personality traits, sociological models
and socio-economic factors influencing the success of small businesses.

Psychological Theories of Entrepreneurship

Psychological trait theories of entrepreneurship contend/state that certain attitudinal and

psychological attributes differentiate entrepreneurs from non-entrepreneurs, and successful
entrepreneurs from unsuccessful ones.

These theories include:

Need for achievement model. - This theory contends/states that people desire to achieve
something for their inner feeling of accomplishment.

1. Locus of control - This theory contends/states that there is a degree to which one believes that
he/she is in control of one’s destiny. This can either be internal or external.
➢ Internals: The internals believe that what happens to them is a result of their internal efforts
whether it is good or bad.
➢ Externals: These believe that whatever happens to them is a result of external factors whether
good or bad. Therefore the theory contends that internals are more successful in business than the
externals.

2. Psychodynamic model - This was propounded by Kets de Vries. This says that people tend to
be self-employed and become successful because of “troubled childhood”. In troubled childhood,
children tend to be lacking, security or abused, low self-esteem, lack of confidence.
Therefore growing in such an environment some people do have repressed wishes towards those
in control.

This condition/situation occurs when a child has been brought up in either of the
following conditions/situations:
➢ Loss of one or both parents
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➢ Broken marriages
➢ Extreme poverty
➢ Refugees, and
➢ Child abuse

In this case when these children grow up they exercise what is called “innovative rebelliousness”
by starting and running their own firms. This is also true due to the fact that being rebellious
she/he cannot fit in any organization as she/he will not like structural environment. In this
situation such kids have;
➢ Averse to structures
➢ To get away from commands, and
➢ To be away from control of anybody

3. Risk taking propensity - This theory contends about one’s willingness to accept risk.
People who are more likely to accept risk and taking chances are more likely of being self-
employed than those who do not take risk.

Sociological Theories of Entrepreneurship

These theories suggest that entrepreneurial behavior is a function of the individual’s

interaction with the society. Sociological models that have received significant empirical support
are the inter-generation inheritance of enterprise culture, social marginality and ethnicity.

1. Social marginality model - This theory suggests that individuals who perceive a strong level
of incongruence between their personal attributes and the role they hold in society will be
motivated to change or reconstruct their social reality. While some people may reconstruct their
reality by changing careers or employers, others may choose self- employment.

‘‘Marginal men” are referred as individuals who are less integrated in their society. Since
marginal men are not completely part of the society of their adoption, they are free of the
restrictions imposed by its value system. At the same time, having left their own society, they are
no longer constrained by its dominant values. This situation gives way to the development of
unconventional patterns of behavior, which increases their propensity to become
entrepreneurs.

2. Ethnicity - An ethnic origin of a person is said to influence the choice between paid
employment and self-employment as well as performance in self-employment. Evidence of over-
representation of certain ethnic groups in business carriers abounds throughout the world.

The ethnic groups often quoted in the literature as being overrepresented in

entrepreneurship include Ibos in Nigeria, Kikuyus in Kenya and Chagga in Tanzania. All of these
are spread in different parts of their countries in which they overrepresented in entrepreneurial
careers. To this extent, they are less integrated in the societies in which they work and therefore
less likely to be constrained by dominant values shared either by their own ethnic group or by
their hosts.

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3. Inter-generational inheritance of enterprise culture via role modeling. - This theory purports
that entrepreneurial practice is largely inherited. Accordingly, offspring’s of entrepreneurial
parents are more likely to be entrepreneurs and be more successful compared to others. It
has been further suggested that a strong grounding in business and ownership ethic at an early
age is a useful and powerful driving force for children as they choose their future carriers.

A person, who grows up around a family that runs a business is likely to benefit from the skills,
accumulated experiences and networks of existing firm. She or he is likely to have better access
to advice, credit, established markets and sources of inputs. The fact that these will make it
easier to start a business may be a big encouragement to those associated with businessmen.

4. Small firms as role models.- It has been observed that employees who work in small firms are
more likely to become self-employed and be successful. This is because it is easier for them to
envision having the role of the owner. Some business owners become mentors by telling their
workers why not start their own businesses like them. Existing small business can support people
by either selling products or buying their products.

5. Social development model. - This theory contends that it is the transactions with different
context in one’s life and career that shape one’s propensity to be self-employed. These are
factors, which start in early, middle or late life.

Socio-economic Factors and Small Firms Performance.

Socio-economic background factors that have received both research interest and empirical
support are type and level of education and occupational experiences. In comparison to
sociological variables, socio-economic background factors lend themselves more readily to
objective measurements.

1. Level of education

Two conflicting hypotheses have been proposed regarding the role of education in the
entrepreneurial process. The first is that formal education can operate as an
impediment/hindrance to entrepreneurship because, rather than develop creative thinkers, it
fosters conformity and low tolerance for ambiguity, leading to thought and behavior process that
refuse to admit tolerance, and social values that preclude “ getting one’s dirty”.

The alternative arguments is that education is seen as capable of developing competencies

required in an entrepreneurial venture including creativity, curiosity, open mindedness, good
interpersonal skills and technical know-how.

Some studies conducted in USA and Australia found that there is a probability of entry into self-
employment to increase with the level of education.

2. Entrepreneurship education

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It is generally agreed that there is a positive association between taking entrepreneurship courses
and becoming self-employed. It has been also found that students who take
entrepreneurship majors tend to be less conforming, more impersonal, more risk taking, more
welcoming of change, and have a higher energy level, a profile similar to that of
successful entrepreneurs.

Entrepreneurship courses may attract those who have entrepreneurial qualities or,
alternatively, move students towards entrepreneurial archetype by challenging assumptions and
encouraging the development of competencies required.

2. Experience

There are three types of experiences that are considered to be important in determining
entrepreneurial success;
1. Industrial (technical or market) expertise;
2. Management expertise; and
3. Entrepreneurial experience.

An individual’s managerial experience as well as previous entrepreneurial experience is

considered to be incentives for one to become a successful entrepreneur. Previous experience as
an entrepreneur is also likely to give one leads and confidence in venturing into a new firm. It
has also been found that management experience provides contacts, information about
business regulations and procedures, people skills and confidence, all of which are useful in
setting up and running a business successfully.

Organizational Behavior

Entrepreneurs are organizational beings as elucidated by Fuller (2020). They do not

function alone in an entrepreneurial entity. They need to interact and work together with other
people within their organization. Thus, they need to understand the concept of organizational
behavior.

Organizational Behavior is a misleading term. It is not the study how organizations behave, but
rather the study of individual behavior in an organizational setting. This includes the study of
how individuals behave alone, as well as how individuals behave in groups.

The purpose of organizational behavior is to gain a greater understanding of those factors that
influence individual and group dynamics in an organizational setting so that individuals and the
groups and organizations to which they belong may be more efficient and effective. The field
also includes the analysis of organizational factors that may have an influence upon individual
and group behavior. Much of organizational behavior research is ultimately aimed at
providing human resource management professionals with the information and tools they need
to select, train, and retain employees in a fashion that yields maximum benefit for the individual
employee as well as for the organization.

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Organizational behavior is a relatively new, interdisciplinary field of study although it draws

most heavily from the psychological and sociological sciences, it also looks to other scientific
fields of study for insights. One of the main reasons for this interdisciplinary approach is because
the field of organizational behavior involves multiple levels of analysis, which are necessary to
understand behavior within organizations because people do not act in isolation. That is,
workers influence their environment and are also influenced by their environment.

Levels of Analysis

1. Individual Level of Analysis/Micro-level Analysis

At this level, organizational behavior involves the study of learning, motivation, personality,
turnover, task performance, cooperative behavior, deviant behavior, ethics, and cognition. It is
a detailed examination of one-on-one interactions between individuals, includes studying
people’s behavior during negotiations, confrontations, and everyday conversations. It allows
for nuanced analysis of particular dynamics of social phenomena but may fail to consider
broader social forces that impact such process. This level of analysis draws upon the sociological
and socio-psychological sciences.

2. Group Level of Analysis/Meso-level Analysis

At this level, organizational behavior involves the study of group dynamics, intra- and
intergroup conflict and cohesion, leadership, power, norms, interpersonal communication,
networks, and roles. Also referred as to as network analysis, this approach examines the
patterns of social ties among people in a group and how those patterns affect the overall
group. This study also draws upon the sociological and socio- psychological sciences.

3. Organizational Level of Analysis/Macro-level Analysis

At this level, organizational behavior involves the study of topics such as organizational
culture, organizational structure, cultural diversity, inter-organizational cooperation and
conflict, change, technology and external environmental forces. At this level of analysis,
organizational behavior draws upon anthropology and political science.

RESOURCES:
• Entrepreneurial Behavior, AmosWEB Encyclonomic WEB*pedia,
http://www.AmosWEB.com , AmosWEB LLC, 2000-2020 –
• Course Hero Inc (2020), SociologicalPerspective. Retrieved from:
https://www.coursehero.com/sg/introduction-to-sociology/macro-level-meso-level-and-macro-
level- analysis/

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• Fuller, J. B. (2020), Organizational Behavior, Retrieved from:

https://www.referenceforbusiness.com/management/Ob-Or/Organizational- Behavior.html?
fbclid=IwAR3DuWQ9sXE-RbGw8UREEybWkpj-qqubRb2IinPFeI7QAkv2FqwWs2ZI-0Y
• Open Text Book (2011), Entrepreneurial Behavior: Transforming an Innovative Idea into an
Entrepreneurial Product • https://www.linkedin.com/pulse/entrepreneurship-theories-models-
jignesh-rathod

Lesson 3
https://www.scribd.com/embeds/671284607/content?
start_page=1&view_mode=scroll&access_key=key-fFexxf7r1bzEfWu3HKwf

ENTREPRENEURIAL BEHAVIOR AND COMPETENCIES| BALABA, RJ V.