Role of Personal Level Determinants in Entrepreneurial Firm’s Success

Ahsan Akbar

 culled from:http://www.academia.edu
 ABSTRACT
 The Paramount value of entrepreneurship in economic growth and development of a nation,
entrepreneurs’ sweeping role for entrepreneurship development, in the light of this, it is necessary to make out the special  personality persona to be familiar with quantified people with entrepreneurial impending capabilities, to develop such capacities, to acquire and provide necessary skills and create a progressive environment, and eventually gets destination of growth and development for the nation. The purpose of this study is to add a few theoretical approaching into the role of entrepreneur in organizational success. This role investigated through peer-reviewed published in wide range of journals, publishing and proceedings. We present a conceptual framework exploring personal factors that are linked to ingredients that facilitate firm success and present a new model. Based on our model, it is possible to conclude that personal background of entrepreneur is not directly contribute to organizational success, rather it has great impact on psychological characteristics, managerial and leadership capabilities, and opportunity recognition and exploitation skills- these factors have strong positive impact on organization success and performance.
KEYWORDS:
Personal Background, Psychological, Opportunity, leadership and management competencies, performance measurement
INTRODUCTION
The word entrepreneur derived from the French verb entreprendre which means to undertake and the German word unternehmer, which means owner-manager (Drucker, 1985). According to the Kilby (1971), The French economist Cantillion (1755) explained that an entrepreneur is a person who provides the management to firm and take risk. Similarly, another French Economist Say said that entrepreneur is a  person who would convert lower productive resources into higher productive resources (Drucker, 1985  p.19). Entrepreneur is the person who creates something new and innovation in existing economy (Schumpeter, 1934). The person who is a risk-taker and has consistency with his goals and objectives in different situation is an entrepreneur (Collins and Unwalla, 1964). The person run the business and bears the risk for the profit and loss is an entrepreneur (Delbridge ed.al, 1991,p.583). Most of firms establish with the individual decision, therefore, individual traits play essential role in the success or failure of the firm. Over the years, key focus of entrepreneurship remains on that how  personality traits influence to become entrepreneur- also to differentiate entrepreneur and manager with these traits. Entrepreneur’s personal characteristics have more important role, compare to any other variable for the success of business. In order to get success, an entrepreneur requires different skills at different stages of business. At the start of business, he should be innovative; risk taker and has willingness to act. It is necessary for an entrepreneur to analyze his/ her own strengths and weaknesses to start a new business. According to Littunen (2000) entrepreneurship can be classified into two groups, one is trait model, through it researchers usually answer the question that why individuals start firms and what are factors which make an entrepreneur to be successful. Second is contingency thinking, in running a business- entrepreneur often face different issues, problems and situations; In order to respond different environment, some new personality characteristics of an entrepreneur develop. Thousands of firms start in every year, out of them; only 10% survive and grow up (Timmons, 1994; Cassar, 2006). Most of the researchers believe that entrepreneurial traits and capabilities are vital to get success. Some of characteristics which successful entrepreneurs usually possess are risk taking abilities, innovativeness, market knowledge, marketing and management skills (Casson, 1982). The other main characteristics of successful entrepreneur are need for achievement, locus of control, need for autonomy,
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need of power, tolerance of ambiguity, and need for affiliation. In many studies, it has been proven that successful entrepreneurs ranked higher in above mention characteristics rather to non entrepreneur.
To Measure the Entrepreneur Performance
There are many different variables to measure the performance of new venture. Over the years, the researchers in the field of entrepreneurship face difficulties to measure the success and failure of the entrepreneurs (Chakravarthy, 1986). Murphy et al. (1996) provided some valuable development and recommendation, and also they identified eight different dimensions to measure the performance of a firm.
Dimensions of Performance Measurement
There are eight dimensions of performance measurement in entrepreneurship which are very widely used research; these dimensions are efficiency, growth, profit, size, liquidity, success/ failure rate, market share and leverage (Murphy ed. al., 1996; Brush and Vanderwerf, 1992). Most of these dimensions measure through in a financial prospective and small portion of measurement is also done through operational and non financial performance measurement (Murphy ed. al., 1996; Venkattraman and Ramanujam, 1986). Murphy ed. al. (1996) said that each dimension of performance can be measured through different way and show different frequency. 1.
 Efficiency:
it can be measured through return on assets, return on investment, and return on equity, gross revenues on per employee. 2.
Growth:
this dimension can be measured through changes in sales, changes in employees, market share growth, changes in net income margin, and changes in CEO / owner compensation and changes in

labor expenses to revenues. 3.
Profit:
 return on sale, net profit margin, gross profit margin, net profit level, net profit from operation, pretax profit and clients’ estimate of incremental profit. 4 & 5.
Size and liquidity:
It can be measured through sales level, ability to fund growth, current ratio, quick ratio, total asset turnover and cash flow to investment. 6.
Success/ Failure:
 Discontinuous businesses, researcher subjective assessment, return on net worth and responded subjective assessment. 7.
 Market Share
: responded assessment and firm product sales to industry product sales. 8.
 Leverage:
 debt to equity and time interest earned.
Objective of the study
The main objective of this research is to find out the link between the entrepreneur’s personal level determinants and their role in organizational survival and success. As the entrepreneur start and run a new  business for his own profit and success, his personal characteristics shape the features of that particular venture. As, person vary, different organization run by them also vary. Therefore, it is necessary to know, what are different personal traits which are important for an organization to survive and get success?
Theoretical Framework:
Entrepreneurship is a very diverse field, and there are many different views and thoughts to define entrepreneurship. Cunningham and Lischeron (1991) and Sambasivan et al (2009) categorized them into six different thoughts and these are (1) the ‘‘great person’’ school of entrepreneurship, (2) the  psychological characteristics school of entrepreneurship, (3) the classical school of entrepreneurship, (4) the management school of entrepreneurship, (5) the leadership school of entrepreneur- ship, and (6) the intrapreneurship school of entrepreneurship. First two schools of thoughts determine the role of personal qualities and skills to become an entrepreneur and how these skills are helpful for the survival and success of venture. Third is relevant with the most important skill of entrepreneur to recognize and exploit opportunity. Fourth and fifth schools determine the role of management skills for an entrepreneur to manage its business. Last school of thought tell us that entrepreneur face many different challenges and issues in running an organization, in this situation he should reconsider and adjust his strategies and way to run organization. So in this research, researchers are going to explore all those variables which are part of above mentioned six schools of thoughts, and their role in organizational success. In this study, we divide this study into three parts; in part first we identify different personal level determinants which lead towards higher entrepreneurial performance. Then we categorize them as personal backgrounds of entrepreneur,  psychological factors, managerial and leadership competencies, and opportunity recognition. In the third
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stage, we propose a model that shows the performance of entrepreneur depend on his traits, capabilities and skills, and these shape through the personal background of entrepreneur.
1.

Personal Background 1.1 Age:
Age is very controversial factor, almost; all researchers have different opinions like Rose et al. (2006) relates age with business success positievely while Bosma et al. (2000) relates age positievely with knowledge rather than the business success. age has positive relation with knowledge and further he add that knowlegde leads the business toward success (Bosma et al., 2000; Rose et al., 2006). Mario, Arminda, & Joao, (2008) are having some different opinion and they divide it which in two parts. 1.

The peoples upto age 24 usually did not feel positive indicator to start as an entrepreneur . 2.

They argue that willingness decreases as the entrepreneur grow old but opportunities increase with the increasing age. Bostjan, (2009) totally disagree with all of the above, according to him age is directly relate with  business success, not to the age of person- it is the age of firm which matters. It is clear that different resarches have diverse results, whether age is directly related with the success of firm or not. As, age increase the chances to start a venture diminsh, but age has postive relationship with the success of firm.
1.2 Education:
Education is an important personal factor; it enables an entrepreneur to make business successful. Almost, all the researchers find out that education is influential for the performance of entrepreneurs. Bosma et al ( 2000) believes that education is personal factor to make business successful. Education plays signigficant role in the success of entrepreneur (Thapa et al, 2008). Rose et al ( 2006) compares educated entrepreneurs with non educated entrepreneurs and gives opinion that educated entrepreneurs have great chance of success. Thapa et al (2008) argue in detail that why education is helpful for successful business? According to him education helps in making decisions, adoption of new technology, and providing market knowledge. Guzman, (1994) found the positive relationship of education with intrinsic motivational factors. The type of education also matters, Michael & Pamela (1995) has divided education in two parts. They said that creative education leads entrepreneur to high level of success, while entrepreneur who gets standardize education, can only get low level of succcess.
1.3 Gender:
There are different findings about gender and their role to start a venture and also to get success. According to Arnold & Kendall, (1995) male and female have similar abilities to start and run the venture successflly, they also claim that femal entreprenurs have higher level of satisfaction. On the other hand, some researchers believe that male entreprenur can engage themselves in entrepreneurship in a better way (Grilo and Thurik, 2005). Most of women want peronsal and economic indepence, but they are less confiedence and capable to run a firm (Mario, Arminda, & Joao, 2008). Women have 50% less posiblity to involve in entrepneurship compared to male (Reynold et al, 2002). In developing countries, females often do low level jobs, they are very keen to seem self employed, they want to improve living standard of their families and they strugle to become to an entreprenur (Van der Kuip, I. and I. Verheul , 2004).
1.4 Experience:
According to Brockhaus (1980) like education, experience also contributes much in business success. Cooper, (1985) regarded experience as a motivational factor which leads towards entrepreneurial success. Rose et al (2006) explained experience in a very typical way by giving comparison of high experience  persons with a low experience one- obviousl, person with high experience is much successful entrepreneur than the person with a low experience. Bosma et al. (2000) simply give a list of field in which one has to gain experience to become a successful entrepreneur. He suggested that the entrepreneur must have experienced in the following fields: Experience in the sector; Experience in the trade; Experience as an employee; Experience in self employment; financial experience; Family experience. If a person has these experiences it will help him to become a successful entrepreneur (Bosma et al., 2000). Interestingly, Michael & Pamela (1995) found that person who has good experience with job is less likely to become an entreprenur, while person with bad experices as an employee is more likely to become an entpreneur. Overall, we can conclude that experience contributes much in business success, but experience must be in relevant field.
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