Motivation Factors in Entrepreneurship

Abstract

The purpose of this paper is to examine the relationship between entrepreneurship and motivation. Based on research from academic journal reviews and leading business magazines (1) Entrepreneurs are natural leaders by definition of their profession who are driven by a variety of factors. (2) The motivation factors of an entrepreneur are similar yet separate from traditional types of motivation factors. (3) Young entrepreneurs and serial/seasoned entrepreneurs’ successes are closely tied to both intrinsic and extrinsic motivational factors.

Entrepreneurship Organizational Theory

            Entrepreneurship is an emerging academic field of study. Over the past sixty years numerous researchers and business professionals have put forth efforts to establish principles and practices for the field of entrepreneurship. The development of organizational theory surrounding entrepreneurship is important for four reasons: (1) Entrepreneurship drives innovation and change in addition to breeding economic growth; (2) Supply and demand reach an equilibrium through the processes of entrepreneurship; (3) Entrepreneurship translates new knowledge into tangible products and services; and (4) the field of entrepreneurship is becoming more important to all economies and requires a clear understanding of the processes involved in the development of human and intellectual capital (Shane, Locke & Collins, 2003, 259).”

For the purpose of this paper, entrepreneurship is defined as a “process that begins with the recognition of an entrepreneurial opportunity and if followed by the development of an idea for how to pursue that opportunity, the evaluation of the feasibility of the opportunity, the development of the product or service that will be provided to customers, assembly of human and financial resources, organizational design, and the pursuit of customers (Shane, Locke & Collins, 2003, 275).”

Entrepreneurs: Born vs. Made

Entrepreneurship is reliant on human agency and the process is ignited by individuals who act on opportunities (Shane, Locke & Collins, 2003, 259). Recently, the topic of nature versus nurture has risen as a launch point for debate within the entrepreneurial community. Some people argue that entrepreneurs are born with inherent traits that lead to success, while others argue that entrepreneurs can be taught.

Vivek Wadhwa argues that entrepreneurs are not born. Silicon Valley Venture Investors have been chastised for their lack of vision or complete avoidance of high potential entrepreneurs. “52% of successful entrepreneurs [are] the first in their immediate families to start a business (Wadhwa, 2010).” Mark Suster replies to the Wadhwa’s argument by stating that entrepreneurship is a combination of nature and nurture. According to Suster, a Venture Capitalist, “there are certain characteristics [displayed] as a child that makes you more pre-disposed to be a successful entrepreneur (Suster, 2010).” Although nurture has a role, Suster believes nature is stronger than nurture.

The nature versus nurture topic is most beneficial because it targets that heart of the entrepreneur. What motivates an entrepreneur? Business professionals and entrepreneurs agree that motivation, which is often called GRIT or stick-to-itiveness, is the driving force behind entrepreneurial success is the motivation; yet academic researchers believe motivations for entrepreneurship go beyond just GRIT.

Types of Motivations

            The success of an entrepreneur depends on an individual’s willingness to become an entrepreneur (Shane, Locke & Collins, 2003, 257). Motivation is a force that compels someone to act. It is often considered to be the engine behind behaviors like working hard and success. The six traditional types of motivation include: incentives, fear, achievement, personal growth, power, and social factors. Entrepreneurship has nine motivational concepts.

There are six types of quantitative motivational concepts connected to entrepreneurship: Need for Achievement, Risk Taking, Tolerance for Ambiguity, Locus of Control, Self-Efficacy, and Goal Setting (Shane, Locke & Collins, 2003, 263-267). Need for Achievement (nAch) is the engagement in activities with a high degree of individual responsibility to achieve specific goals/outcomes (Shane, Locke & Collins, 2003, 263-264). Risk taking is a higher achievement motivation because it requires individuals to participate in activities that provide challenges (Shane, Locke & Collins, 2003, 264). Tolerance for Ambiguity is a propensity to euphemize challenging situations as opportunities instead of threats (Shane, Locke & Collins, 2003, 265). Locus of Control refers to a belief that an individual’s actions affect outcomes (Shane, Locke & Collins, 2003, 266). Self-Efficacy is related to achievement- the individual has a belief in their own ability to implement different resources, skills, and competencies to achieve a desired result (Shane, Locke & Collins, 2003, 267). Finally, goal setting is tied to incentives specifically financial performance (Shane, Locke & Collins, 2003, 267).

These six motivational concepts were developed by approximately twenty-five different quantitative studies over the course of forty-four years. Another quantitative factor not mentioned in the study by Shane et. al is money (Ademyi, 2010). Contrarily  there are fewer types of qualitative motivational concepts connected to entrepreneurship: Independence; Drive; and Egoistic Passion (Shane, Locke & Collins, 2003, 268). Independence refers to freedoms in decision making and ability to be authoritative. Drive is closely related to the nAch, but is more broadly defined to include ambition, goals, energy, stamina, and persistence. Egoistic Passion is a deep commitment to the work with the ego being the central motive. Another qualitative factor found in a separate study by Humantelligence offers friendship as a motivational factor (Tracy, 2012).

The table below is not based on research but depicts a proposed relationship between the traditional types of motivation and entrepreneurship motivational factors.

	Internal Factors			External Factors
Traditional Motivation Factors	Achievement	Fear	Personal Growth	Power	Incentives	Social Factors
Entrepreneurship Motivation Factors	Need for Achievement	Risk-taking	Drive	Locus of Control	Goal Setting	Friendship
	Self-efficacy	Ambiguity Tolerance	Egoistic Passion	Independence	Money

Internal vs. External Motivation

             Humantelligence conducted a study to identify motivations factors of young entrepreneurs. The study reflects the attitudes and opinions of 250 business owners between the ages of 18 to 22 years old (Tracy, 2012). Based on the study, the majority of young entrepreneurs value the freedom presented by the field of entrepreneurship. The locus of control 64%  preferred work requiring creativity (thinking outside the box and breaking established rules) and 65% preferred work that required problem solving on a consistent basis (Tracy, 2012). Consistent with the nine types of quantitative and qualitative motivators identified by Shane, Locke, and Collins the report showed the group studies placed a high importance on “achievement, personal development, adventure, [and] creativity (Tracy, 2012).”

Another interesting case is the case of the serial entrepreneur. A serial entrepreneur is an individual who creates multiple businesses. Serial entrepreneurs tend to be more risk-averse than new entrepreneurs. One reason is because they have experienced more successes and failures than a younger entrepreneur. The secret to their “bullet-proof egos” lies within internal motivation – purpose (Berglass, 2010). While external motivation such as monetary gain continues to propel serial entrepreneurs to continue to create, it is the opportunity to make an imprint on the world that propels this unique group of individuals forward. “In psychiatry this attribute is known as generativity, a passion to improve the planet for successive generations (Berglass, 2010).” Comparing the results of the study on young entrepreneurs and the findings of a world-renowned psychiatrist and author on seasoned entrepreneurs, both groups seemed more inclined to accept internal motivators as the most influential. This is further supported by the study conducted by the Universiti of Putra Malaysia “which showed that personal initiative was one major key to success (Rose, Kumar & Yen, 2006, 14).”

Although internal motivators may be valued as the most influential motivator for entrepreneurs, it is important to recognize the role of external motivators. Dr. S.L. Adeyemi studied the motivations of Nigerian entrepreneurs. The study concluded that “internally motivated entrepreneurs are more likely to experience a high level of growth than externally motivated entrepreneurs [and] externally motivated entrepreneurs are more likely to achieve a high level of profitability than internally motivated entrepreneurs (Adeyemi, 2006, 11).” The study identifies two different types of success: Success is defined as profitability and/or growth (Adeyemi, 2006, 2).  “The most important external motivation factor in regard to explaining profitability is the factor ‘money’ [and] internal achievement was the most important factor in explaining growth (Adeyemi, 2006, 9-10).” Surprisingly, low internal motivation has a direct correlation to low-profitability and money had a negative effect on growth in this study.

Conclusion

Entrepreneurs are natural leaders by definition of their profession who are driven by a variety of factors.  The argument of nature versus nurture is irrelevant, except for the fact that it steers discussion toward motivation factors for entrepreneurs. Although GRIT is often cited as the primary motivational factor for entrepreneurs, there are nine identified motivational factors at work in the field of entrepreneurship. The motivation factors of an entrepreneur are similar yet separate from traditional types of motivation factors. Qualitative and quantitative motivation factors include: Need for Achievement; Risk Taking; Tolerance for Ambiguity; Locus of Control; Self-Efficacy; Goal Setting; Independence; Drive; and Egostic Passion. Young entrepreneurs and serial/seasoned entrepreneurs’ successes are closely tied to both intrinsic and extrinsic motivational factors. Extrinsic motivation factors have a high correlation to increased profitability while intrinsic factors result in both higher-profitability and growth.

Bibliography

Adeyemi, S. L. (2006). Motivation and business success the relationship between entrepreneurs motivation and new business ventures success. Journal of Arid Zone Economy, 7(1), 122-131.

Berglas, S. (2010, August 03). Why serial entrepreneurs can't stop Forbes Magazine, Retrieved from http://www.forbes.com/2010/08/02/serial-entrepreneurs-berglas-entrepreneurs-management-serial-startups-10-berglas.html?feed=rss_entrepreneurs

Rose, R. C., Kumar, N., & Yen, L. L. (2006). The dynamics of entrepreneurs’ success factors in influencing venture growth. Journal of Asia Entrepreneurship and Sustainability, II(3), Retrieved from http://www.asiaentrepreneurshipjournal.com/AJESII3Kumar.pdf

Shane, S., Locke, E. L., & Collins, C. J. (2003). Entrepreneurial motivation. Human Resource Management Review, 13, 257-279. Retrieved from http://numerons.in/files/documents/6Entrepreneurial-motivation.pdf

Suster, M. (2010, March 01). Entrepreneurship: Nature vs. nurture?. Business Insider. Retrieved from http://www.businessinsider.com/entrepreneurship-nature-vs-nurture-2010-3

Tracy, A. (2012, February 16). What motivates tomorrow's great entrepreneurs?. Inc. Magazine, Retrieved from http://www.inc.com/abigail-tracy/what-motivates-tomorrows-great-entrepreneurs.html

Wadwwa, V. (2010, February 27). Techcrunch. Retrieved from http://techcrunch.com/2010/02/27/can-entrepreneurs-be-made/