trait theories of entrepreneurship, we can gain a better understanding of the differences between entrepreneurship and other economic forms. Key to this understanding is examining the traits of serial entrepreneurs to see how they approach the issue of risk.
When human civilization first development, most goods were produced at a subsistence level, and this was the sum total economic activity -- there was no money and no profit. Over time, advances in production techniques, especially in agriculture gave rise to surpluses, which could then be traded. The barter of agricultural surplus in ancient communities can be said to be the first entrepreneurism (Allis, 2014). More formal entrepreneurism of the type that we would recognize today, featuring the investment of capital in a small enterprise designed specifically to earn profit, would have emerged as people collected into village and towns, allowing for specialization into trades. These trades would have produced above subsistence level, marking a significant shift in the economic structure of society. Further development of the first coins contributed significantly to modern entrepreneurship by providing liquidity and cash flow, allowing for entrepreneurial enterprises to grow to very large levels never seen before (Harper, 2013).
Banks as we know them emerged in major European centers in the Middle Ages -- some Italian banks today are six hundred years old -- and provided even greater access to capital for people to employ. When the Agricultural Revolution freed up a critical supply of labor, and new technology in the Industrial Revolution allowed for more sophisticated machinery, entrepreneurship received a significant boost. Now a person could start a business and grow it as much as the market would bear. Entrepreneurs have always been the ones who seized upon an opportunity in the marketplace, and chose to pursue it themselves rather than working for someone else. These individuals have gone on to become some of the greatest economic contributors in history, and this paper will examine the characteristics that define entrepreneurs. Today, there are an estimated 388 million entrepreneurs in the world (Kelley, Singer & Herrington, 2012).
Entrepreneurship is defined as 'carrying out new combinations, which may take the form of new products, processes, markets, organizational forms or sources of supply" (Sharma & Chrisman, 1999). This definition seems flawed in terms of eliminating almost all non-inventory entrepreneurial activity. Putting up capital to start a new business seems are more realistic vision of an entrepreneur, because it entails the most important element that distinguishes entrepreneurship from other economic activity -- risk.
The critical defining element of entrepreneurism is risk-taking. Kelley, Singer and Herrington identify early stage entrepreneurship -- divided into nascent and new - as the first step of entrepreneurism. At this stage, new businesses are especially vulnerable. They may not have adequate capital, and are unlikely to have established stable cash flow. The entrepreneur is often the source of capital, and therefore bears the risk him or herself. If there is outside capital, it is still the effort of the principle that drives the business, and the business itself still bears a high level of risk. Pursuit of employment in government or in a corporation does not usually entail the same degree of risk, in particular risk to one's livelihood, that entrepreneurism does, and that risk derives from the fact that the venture is new and the venture therefore lacks proven track record (Cuervo, Ribeiro & Roig, 2007). It would be absurd to characterize entrepreneurship is existing in an "environment of failure" -- entrepreneurs might accept risk, but the environment is by no means one of failure, unless you are in a war zone. The environment has both opportunities and threats, successes and failures, risk and safety. An intelligence view of the world recognizes these dichotomies and sees that we all occupy the same world -- entrepreneurs are seeking the opportunities for success, not obsessing about the threat of failure.
Michael Gartner has championed the idea of entrepreneurial seizure, which is to say that most entrepreneurs believe that when they start their own business, they will be free from having a boss. Instead, they are replacing that boss with themselves, and in that they have a somewhat flawed understanding of what it means to be on your own. He argues that this creates situations where the entrepreneur is not really an entrepreneur -- only when they create businesses that work for them have they truly transitioned to becoming an entrepreneur (Ferriss, 2013). I see this view as somewhat extreme, but useful in illustrating an important reality -- that entrepreneurs are not by any means free. They have simply transitioned the risk to themselves of operating a business, and to justify that they should earn profits. That means having a business that works for you, rather than you working harder than ever before. I see this more as the distinction between a successful entrepreneur and a less successful one, than the distinction between those who are not entrepreneurs and those who are. It seems a little mad to consider Steve Jobs, Fred Smith and others who are lifelong CEOs of the company their started to not be entrepreneurs simply because they still work(ed) hard at their companies.
Entrepreneurs have begun in the past couple of decades to fascinate academia. The rise of entrepreneurial rock stars has helped to fuel this fascination, as entrepreneurs are essentially the embodiment of an American Dream that seems ever more elusive. Welter (2010) argues that entrepreneurs arise under a number of different contexts, and that understanding the nature of entrepreneurship depends on our understanding of these contexts. Cuervo, Ribeiro and Roig (2007) argue more succinctly that entrepreneurship "implies the discovery, assessment and exploitation of opportunities, in other words the new products, services and production processes." Along with the idea of entrepreneurial seizure, this view again seems to accept only successful entrepreneurs as true entrepreneurs, a 'no true Scotsman' fallacy. Indeed, entrepreneurship literature seems scornful to those who do not succeed, when the proper definition of an entrepreneur revolves around the taking of risk, not the successful conquering of it. If you die on Everest, nobody will remember your name but you are still a mountain climber.
There are further understandings of what it means to be an entrepreneur. Aldrich and Zimmer (1986) view entrepreneurship from the basis of social networks -- the social context of entrepreneurial activity is its defining feature. Entrepreneurs contribute risk capital to society, and in doing so they at least have the potential to advance human economic endeavor. Specific personality traits seem to be common among entrepreneurs, they argue, but the ability to build a social network to attract capital, minimize risk and build the business seems to be chief among them.
Ideas such as these trait-based theories have given rise to entrepreneurship as a field within the social sciences, rather than business schools, in attempt to capture the essence of entrepreneurship. Entrepreneurship exists as a mechanism through which society finds ways to identify and remove economic inefficiency, which involves not only analytical skills but finding the means by which to exploit these gaps (Shane & Venkataraman, 2000).
The resource-based view has also been applied to the study of the nature of entrepreneurship. Given that entrepreneurship is about the differential relationship with risk that entrepreneurs have, it is important to consider that entrepreneurs might see themselves as having the means by which that risk can be minimized. The entrepreneur differs from the manager not in that they both acquire and marshal resources to solve problems and meet strategic objectives, but in that the entrepreneur is not building from a foundation of stability -- they are essentially performing the same task in a much riskier milieu (Peteraf, 2011).
The concept of entrepreneurship as defined by risk brings us to the question of intrapreneurship, or entrepreneurship within the context of a larger organization. There are two ways to look at this. The first is that many of the same functions are performed -- the entrepreneur identifies and opportunity within the market and the corporation acts merely as a source of capital (Qiang, Jiang & Jian, 2009). The other perspective is that within the risk element, this is corporate endeavor and not true entrepreneurship. It might take on certain characteristics of entrepreneurship, but not the key one, hence the concept is essentially bastardized in this understanding.
Ultimately, most researchers feel that the attitudes towards risk are the defining characteristic of entrepreneurs (Cramer, Hartog & van Praag, 2002). Risk attitude serves as a selection mechanism, with entrepreneurs feeling less apprehensive about risk. Fairlie and Holleran (2012) confirm that those individuals who have higher risk tolerance are more likely to be entrepreneurs, providing additional support for trait-based theories of entrepreneurism. This is an interesting concept, when we look back at the history of entrepreneurism, because many individuals were predisposed to risk. There were little security in any aspect of life for most of human history -- opportunity was critical but many people became entrepreneurs and took steps to…