Is entrepreneurship merely a special case of leadership?
The Entrepreneurial Leader has become a powerful cultural symbol in today's society, and is instrumental in driving important changes in business and in society. An entrepreneurial leader is often viewed as charismatic with a grand vision, strong influencing powers and the drive to introduce innovative change. Depending on the definition, this figure can be found in small business, large business, politics and even the arts.
Entrepreneurship has proven its importance to the economies of the world by providing a major contribution to job creation and economic growth through new venture creation (Amit, Glosten, & Muller, 1993), and by providing a way for established organisations to cope with the ever-increasing pace of change (Hannagan, 2007; McGrath & MacMillan, 2000).
Drucker (1998) states, "Much confusion exists about the proper definition of entrepreneurship. Some observers use the term to refer to all small businesses, others to all new businesses. In practice, however, a great many well-established businesses engage in highly successful entrepreneurship. The term, then, refers not to an enterprise's size or age, but to a certain kind of activity. At the heart of that activity is innovation: the effort to create purposeful, focussed change in an enterprise's economic or social potential".
From an academic standpoint, the term entrepreneurship has as nearly as many definitions as there have been attempts to analyse it (Fernold, Solomon, & Tarabishy, 2005), and there does not yet exist a cohesive, predictive, nor normative theory to use as a reference (Amit et al., 1993). So in order to consider the relationship between entrepreneurship and leadership, one must first carefully consider what entrepreneurship is from its different perspectives.
A brief History
Although leadership has been studied since around 500 BC, entrepreneurism is a relatively younger addition to the field is the study (Fernold et al., 2005). Historically, entrepreneurship and leadership have been conceptualised as "acts by exceptional individuals", with innovations emerging from "heroic inventors" who had the genius to spot opportunities (Perrin, 2002 citing Lounsbury, 1998), and heroic leaders delivering political, business and military successes.
By the 1700s, the term entrepreneur came to mean risk taker; in the 1800s the term evolved to consider capital suppliers (venture capitalists) separately from capital users (entrepreneurs); by the 1900s, entrepreneurs were managers who operated organisations at risk for personal gain. By the middle of the 20th century, the entrepreneur was aligned with innovation " (Hisrich & Peters, 2002). In recent decades the importance of the wider social and economic context of entrepreneurial activity has been recognised (e.g. Belussi and Arcngeli, 1998; Green et al, 1999).
The term is still evolving, but at its core it involves taking on risk in an uncertain environment, to build an organisation to exploit an opportunity for personal gain.
The different "schools" of entrepreneurship
Today, entrepreneurism is seen from different lenses by different authors, with some focussing on innovation and creativity, others looking at personal traits, vision and drive, and others considering the mechanics of building a new enterprise including networks, market readiness, resources, resourcefulness and organisational lifecycles.
In practice, an entrepreneur deals with all these things. But so do many managers and leaders, and this leads to confusion with defining entrepreneurism separately from leadership. Some studies looking at this relationship have turned to set theory to collate a list of traits of a successful leader and a successful entrepreneur, and found that one is not a complete subset of the other (Perrin, 2002), but instead the two fields are discrete but with overlapping scope.
The field of entrepreneurial research is mainly concerned with understanding how opportunities for creating new products, services and market value "are discovered, created, and exploited, by whom, and with what consequences" (Venkataraman & Shane, 1997). This is explored mainly through the lenses of economic theory, business strategy, management tactics and personal traits of the leaders who mobilise the resources required to exploit the opportunity (Lounsbury & Glynn, 2001).
Research on entrepreneurship tends to define entrepreneurship in two ways, the entrepreneurial person and the entrepreneurial firm (Fernold et al., 2005). Entrepreneurial firms are typically small (Stogdill, 1974), however a new definition of entrepreneurship within larger firms, called intrapreneurship (Buchanan & Badham, 1999), has also been coined to cover activities within larger firms such as the creation of new ventures, new products and re-engineering.
Comparing with the more established fields of management and leadership, the component parts of entrepreneurship can be found repeated in innovation, strategy, human resources and change management (Vecchio, 2003).
This leads some to speculate whether entrepreneurship is something different to both management and leadership (Hisrich & Peters, 2002; Venkataraman & Shane, 1997), or whether it should even exist as a separate field of study at all (Hisrich & Peters, 2002; Vecchio, 2003). Are we simply studying the existing disciplines of strategy, innovation, management and leadership?
With a nod to Mintzberg (1998), the remainder of this blog series takes a safari to each of the different schools of thought in the literature to find out, starting with Entrepreneurship as a Personality Trait.
This is the first article in a series exploring the relationship between entrepreneurship and leadership, adapted from research I performed for my Master of Business.
The complete series is listed below:
- Is Entrepreneurship merely a special case of leadership?
- Entrepreneurship as a personality trait
- Entrepreneurship as a leadership style
- Entrepreneurship as an activity
- Entrepreneurship as a skill
- Entrepreneurship as corporate culture
- The rise of the Entrepreneurial Leader