CPU Business and Technology College

0|Page
 Motivation to become an entrepreneur: A review of literatures

Abstract:

Purpose: The purpose of this article is to review studies conducted related to motivation to become an
entrepreneur from different perspectives. It based on a theory of entrepreneurial opportunity
identification and development, factors triggering entrepreneurship and why some people choose to
became entrepreneurs? Therefore, understanding and explaining forces within the individual that
motivates them is highly desired.

Design/methodology/approach: The review is based on the analysis of: - theoretical literature and
research papers within the area of motivations of individuals to became an entrepreneur, Idea Exchange
forum and the authors’ experience on the subject matter.

Finding: Studies identify no single approach is sufficient to explain individuals’ decision to start an
entrepreneurs rather a model integrating two levels of analysis, the individual and the environment, to
explain venture creation decisions is identified. In case of decisional factors to become entrepreneurship,
necessity-driven entrepreneurs are pushed into entrepreneurship because all other options for work are
absent or unsatisfactory and opportunity driven entrepreneurs are attracted to entrepreneurship mostly out
of choice to exploit some business opportunity. In the other case in relation to entrepreneurial opportunity
identification and development entrepreneur’s personality traits, social networks, and prior knowledge as
antecedents of entrepreneurial alertness to business opportunities.

Research limitations/implications: The studies did not examine the role of negative motivations, or
“push” factors. Although research on the nature, causes, and consequences of entrepreneurial motivation
has grown rapidly, it has evolved in distinct theoretical silos that tend to isolate motives based on the
phase of business development (e.g., initiation, growth, and exit) rather than acknowledge that individuals
often traverse all these phases and experience multiple types of motivation throughout their
entrepreneurial journey.

Practical implications: As a result of this research, educators, government officials, and others interested
in stimulating entrepreneurial motivation should consider how their words and actions affect potential
entrepreneurs’ perceptions of entrepreneurial feasibility and net desirability.

1|Page
 1. Introduction

The value of new business creation and growth through entrepreneurs is vital for economic
development. Understanding not just what motivates individuals towards entrepreneurship, but
who to target policies and incentives towards, is critical for institutions and policymakers. It had
been suggested [Carsrud and Brannback, (2011), p.9] that often entrepreneurial motivation is a
topic which seems to have been abandoned in numerous earlier studies, without being fully
investigated. And further advocated is that the accumulated knowledge from social science
disciplines being built on may have impeded research on entrepreneurial motivation.

Being an entrepreneur, one who is self-employed and who starts, organizes, manages, and
assumes responsibility for a business, offers a personal challenge that many individuals prefer
over being an employee working for someone else.

In other case identifying and selecting the right opportunities for new businesses are among the
most important abilities of a successful entrepreneur (Stevenson et al., 1985). Consequently,
explaining the discovery and development of opportunities is a key part of entrepreneurship
research (Venkataraman, 1997). Numerous models of opportunity recognition and/or
development have been presented in recent years (Bhave, 1994; Schwartz and Teach, 1999;
Singh et al., 1999, De Koning, 1999; Sigrist, 1999).

Entrepreneurs accept the personal financial risks that go with owning a business but also benefit
directly from the potential success of the business. Being an entrepreneur is often viewed as an
aversive career choice where one is faced with everyday life and work situations that are fraught
with increased uncertainty, impediments, failures, and frustrations associated with the process of
new firm creation (Campbell, 1992).

In this paper it is intended to investigate studies on entrepreneurial motivation to identify an

effective theory that enables recognizing ‘who’ could potentially become an entrepreneur, rather
than ‘how’ and ‘why’ individuals choose to become entrepreneurs.

Along with this, defining and attempting to measure the motivation of individuals could not be
considered complete without investigating and understanding the behaviors and attitudes,
commonly known as the culture, of the groups within same and different countries and regions.

2|Page
 2. Overview of Entrepreneurship

The concept ‘entrepreneurship’ is highly complex, with no one concise definition. But, concisely
Entrepreneurship is both the study of how new businesses are created as well as the actual
process of starting a new business while the term is used interchangeably. An entrepreneur is
someone who has an idea and who works to create a product or service that people will buy, by
building an organization to support those sales (Zimmerer and Scarborough, 2008, p.5.).

The term “Entrepreneur” has been defined in different ways by diverse people and yet no
consent has been reached on one commonly received meaning; it’s elusive, difficult to define
(Kao, 1989). Nevertheless, most entrepreneurship literature describes entrepreneurship as a vital
tool in achieving economic prosperity. It is considered as a desirable quality that is capable of
abolishing all the vices related to economic augmentation, social disparities and employment and
many countries of the world are actively seeking ways and means to promote entrepreneurship
(Saeed et al 2014).

3. Theory of entrepreneurial from Dubin’s methodology

“Entrepreneurship is concerned with the discovery and exploitation of profitable opportunities”.

Furthermore many scholars have identified opportunity recognition as one of the most important
aspects of entrepreneurial process. So, no one can be an entrepreneur without recognizing an
opportunity. Moreover the more ability they have to recognize opportunities the more possibility
is there to be an entrepreneur. (Baron and Tang, 2009; Casson & Wadeson, 2007; Gaglio & Katz,
2001; Shane, 2000).

Dubin (1978) provides a comprehensive methodology for theory building that is particularly
relevant for applied fields such as management, marketing, and organization theory. The eight
phases of Dubin’s theory building are: (1) units (i.e., concepts) of the theory, (2) laws of
interaction (among the concepts), (3) boundaries of the theory (the boundaries within which the
theory is expected to apply), (4) system states of the theory (conditions under which the theory is
operative), (5) propositions of the theory (logical deductions about the theory in operation), (6)
empirical indicators (empirical measures used to make the propositions testable), (7) hypotheses
(statements about the predicted values and relationships among the units), and (8) research (the
empirical test of the predicted values and relationships).
3|Page
From this perspective our review indicates that, individuals must possess prior knowledge and
cognitive faculties in order to evaluate and identify new means–ends relationships. Their effort
served as a guideline for knowledge leads to recognition of (especially hot) opportunity.
Therefore, it implies that the effect of prior knowledge is stronger than financial awards.
Entrepreneurs spend more time than managers on gathering information to recognize
opportunities, but after exploiting of opportunity.

Some studies maintained that there are differences in individual capacities to recognize
opportunities. For instance: prior information and knowledge (Shane, 2000), social network
structure (Singh, Hills, Hybels, & Lumpkin, 1999), Pattern recognition skills (Baron& Ensley,
2006), psychological, alertness (Gaglio & Katz, 2001), Individual genetic makeup (Ardichvili et.
al, 2003). Creativity (Hills, Lumpkin, and Singh 1997), importance of an active search for
opportunities and its main factors (Gaglio and Katz, 2001).

4. Motivation to entrepreneurship: Necessity and opportunity driven entrepreneurship

Individuals decide to start-up a business venture because of a combination of motivations,

though in the 21st century we‘ve witnessed the emergence of thought which adopts a
dichotomous depiction of entrepreneurial motivation as either necessity-driven or opportunity-
driven (Devins, 2009; Benz, 2009; Williams & Williams, 2014). As Minniti et al. (2006) found
in a Global Entrepreneurship Monitor (GEM) survey, nearly all individuals starting-up business
can be sorted into one of the two categories.

The necessity vs opportunity entrepreneurship classification of Reynolds et al. (2002) is made

mainly based on distinguishing between entrepreneurs motivated by economic needs and those
driven by a desire for self-realization respectively. The necessity-driven entrepreneurs are pushed
into entrepreneurship because all other options for work are absent or unsatisfactory. Whereas,
opportunity driven entrepreneurs are attracted to the world of entrepreneurship mostly out of
choice to exploit some business opportunity, Williams and Round, (2009).

The idea of necessity and opportunity entrepreneurship relates to the earlier work on “push
versus pull” motivations for starting a venture (Cooper & Dunkelberg, 1986; Amit & Muller,
1995; Solymossy, 1997), Oxenfeldt (1943) was one of the first to argue that unemployed
individuals may become self-employed to afford the cost of living. Within the context of GEM,
4|Page
Reynolds et al. (2002) attached a label, necessity-driven, to individuals who didn‘t have better
choices for work, whereas opportunity-driven individuals would take advantage of business
opportunities.

5. Why Do Some People Choose to Become Entrepreneurs? An Integrative Approach

Different approaches have been employed to address the question why do some not all people
choose to become entrepreneurs. Among them, trait approach has received a lot of attention.
Entrepreneurial activities are performed in uncertain situations, so entrepreneurs need to face
uncertainty and bear risk (Mises, 1963). Some psychological traits such as tolerance for
ambiguity and risk taking seem to be important for entrepreneurship, but research has not
provided strong support for this argument (Bhide, 2000). Scholars have also used other
approaches, including demographic, cognitive, and environmental, but any single approach is not
sufficient to explain entrepreneurial behavior.

Individuals’ decision to start a business can be affected by many factors, including personalities,
cognitive attributes, social networks, prior knowledge and experience, and market/industry
conditions (Ardichvili et al., 2003; Short et al., 2010). These factors are related to two levels of
analysis: the individual and the environment. It has been argued that venture creation cannot be
understood adequately without consideration of both the individual and the environment
(Carsrud & Johnson, 1989). Very few studies have addressed the integration of the two levels of
analysis.

The environment provides opportunities that are necessary for venture creation, but it is the
individual who makes choices (Shaver & Scott, 1991). When individuals are well prepared both
technically and psychologically, they are always potential entrepreneurs. No matter how
unpredictable and unsupportive the environment is, they are able to navigate the uncertainties
and complexities to detect potential opportunities and act on them perseveringly. When people
are only partially prepared, either technically or psychologically, they are still likely to become
entrepreneurs, depending on the conditions of the environment. The nature of the opportunity
and the availability of support resources can shape their entrepreneurial decisions. If people are
not prepared both technically and psychologically, they would be least likely to start their own
business.
5|Page
 6. Conclusion

Entrepreneurial activity depends on the decisions that people make, suggesting that the attributes
of the decision makers should influence the entrepreneurial process. The development of
entrepreneurship theory requires consideration of the motivations of people making
entrepreneurial decisions.

Opportunity-driven entrepreneurs may have better social network that is fruitful for their
business development as they have stayed longer. They are more likely to spend time carefully
planning their initiatives and, even if they don‘t, they are more likely to have the social circle
necessary to launch a successful business. Necessity-driven entrepreneurs generally do not (or
cannot) carefully plan their initiatives in comparison to opportunity-driven entrepreneurs; they
have sparse capital, education, skills, and knowledge, thus making it difficult for them to develop
differentiated products and services.

In explaining the "push" and the "pull" factors associated with motivations to start a business,
inadequate family income, the need for flexible work hours and job dissatisfaction push to have
their own businesses. While entrepreneurial aspiration, self-confidence, higher social status,
higher wealth, and power are "pull" elements.

Entrepreneurial decisions are made by individuals who identify and act on opportunities from the
environment. Therefore, entrepreneurial can be better explained by integrating both the
individual and the environment. The importance of the environment is the central, and also we
have to emphasize the central role played by the individual. Ideally, the individual is both
technically and psychologically prepared for being an entrepreneur. If the individual is not
prepared perfectly, a more common situation in the real world, venture creation is still likely.
The environment may facilitate the venture creation process through providing support
resources.

Entrepreneurs identify business opportunities to create and deliver value for stakeholders in
prospective ventures. While elements of opportunities may be ‘‘recognized,’’ opportunities are
made, not found. Careful investigation of and sensitivity to market needs and as well as an ability
to spot suboptimal deployment of resources may help an entrepreneur begin to develop an

6|Page
opportunity (which may or may not result in the formation of a business). But opportunity
development also involves entrepreneurs’ creative work. Therefore, ‘‘opportunity development’’
rather than ‘‘opportunity recognition,’’ should be our focus. The need or resource ‘‘recognized’’
or ‘‘perceived’’ cannot become a viable business without this ‘‘development.’’

7. Future Directions

Through researching the behavior, mind-sets, attitudes, values and experiences of entrepreneurs
we can gain understanding about how these individuals think and perceive the world. The study
of entrepreneurs and other successful individuals must be better understand and differentiate
between, those behaviors, mind-sets, attitudes, and values that lead to success and those that lead
to failure. Future entrepreneurship research should engage in exploratory study of the
entrepreneurial mind to improve understanding of what makes some individuals successful and
others not. Further study in to the entrepreneurial mind may look at the relationship between
entrepreneurial mind-sets and failure.

Potential entrepreneurs should draw from this article lessons about their decision to engage in
entrepreneurship. It is clear from this article that entrepreneurs usually engage in an area that
they have focused on for many years. Potential entrepreneurs need to take in to account the
importance of self-efficacy and passion in the area they choose to engage in. Whether they have
developed the requisite capabilities in an area before venturing in to entrepreneurship will be a
significant factor in their success. It seems that potential entrepreneurs should focus on
discovering opportunities in an area that they have already put a large amount of focus in.

This study focused on motivations to become entrepreneur and that led to successful
entrepreneurs. Future researchers should study all characteristics that lead to unsuccessful
entrepreneurs. Other important areas of study include why some entrepreneurs are satisfied with
less success than others.

7|Page
References

Amit, R., & Muller, E., (1995), ―Push‖ and ―pull‖ entrepreneurship‖, Journal of Small
Business & Entrepreneurship, vol. 12, no. 4, pp. 64-80.

Ardichvili, A., Cardozo, R., & Ray, S. (2003). A theory of entrepreneurial opportunity
identification and development. Journal of Business Venturing, 18(1): 105-123.

Baron ،R. A. ،& Tang ،J. (2009). Entrepreneurs’ social skills and new venture performance:
Mediating. Mechanisms and cultural generality. Journal of Management ،35: 282–306.

Benz, M., (2009), ―Entrepreneurship as a non-profit-seeking activity‖, International

Entrepreneurship and Management Journal, vol. 5, no. 1, 23-44.

Bhide, A. V. (2000). The origin and evolution of new business. New York: Oxford Press,
Chapter 4 “Distinctive Qualities”.

Campbell, C.A. (1992), “A decision theory model for entrepreneurial acts”, Entrepreneurship
Theory and Practice, Vol. 17 No. 1, pp. 21-7.

Carsrud, A. and Brannback, M. (2011) ‘Entrepreneurial motivations: what do we still need to

know?’ Journal of Small Business Management, Vol. 49, No. 1, pp.9–26.

Cooper, A. C., & Dunkelberg, W. C., (1986), ―Entrepreneurship and paths to business
ownership‖, Strategic Management Journal, vol. 7, no. 1, pp. 53-68.

De Koning, A., 1999. Conceptualizing Opportunity Recognition as a Socio-Cognitive Process.

Centre for Advanced Studies in Leadership, Stockholm.

Devins, D., (2009), ―Enterprise in deprived areas: what role for start-ups?, International
Journal of Entrepreneurship and Small Business, vol. 8, no. 4, pp. 486-498.

Dubin, R., 1978. Theory Building, second ed. Free Press, New York.

Gaglio, C.M. & Katz, J. (2001). The psychological basis of opportunity identification:
Entrepreneurial alertness. Small Business Economics, Small Business Economics: An
International Journal, 16(2), 95–111

8|Page
Hills, G. E., Lumpkin, G. T., & Singh, R. (1997). Opportunity recognition: Perceptions and
behaviors of entrepreneurs. In P. Reynolds, W. Bygrave, N. Carter, P. Davidsson, W.
Gartner, C. Mason, & P. McDougall (Eds), Frontiers of Entrepreneurship Research, Babson
Park, MA: Babson College.

Minniti, M., Bygrave, W., & Autio, E., (2006), Global Entrepreneurship Monitor: 2005
Executive report, London Business School.

Mises, L. von. (1963). Human Action, Rev. Ed., New Haven: Yale University Press.

Reynolds, P. D., Camp, S. M., Bygrave, W. D., Autio, E., & Hay, M., (2002), Global
Entrepreneurship Monitor: 2001 summary report. London Business School and Babson
College.

Schwartz, R., Teach, R., 1999. A model of opportunity recognition and exploitation: an empirical
study of incubator firms. Presented at the 13th UIC/AMA Symposium on Marketing and
Entrepreneurship Interface, Nice, June.

Shane, S. (2000), "prior knowledge and the discovery of entrepreneurial opportunities",

organization science, Vol.11. No. 4, pp.448-69.

Short, J. C., Ketchen Jr. D. J., Shook, C. L., & Ireland, R. D. (2010). The concept of
“opportunity” in entrepreneurship research: Past accomplishments and future challenges.
Journal of Management, 36(3): 40-65.

Sigrist, B., 1999. Entrepreneurial opportunity recognition. A presentation at the Annual

UIC/AMA symposium at Marketing/Entrepreneurship Interface, Sofia-Antipolis, France.

Singh, R., Hills, H., Lumpkin, G.T., 1999. Examining the role of self-perceived entrepreneurial
alertness in the opportunity recognition process. Presented at the 13th UIC/AMA
Symposium on Marketing and Entrepreneurship Interface, Nice, June.

Singh, R., Hills, H., Lumpkin, G.T., 1999. Examining the role of self-perceived entrepreneurial
alertness in the opportunity recognition process. Presented at the 13th UIC/AMA
Symposium on Marketing and Entrepreneurship Interface, Nice, June.

9|Page
Solymossy, E., (1997), Push/pull motivation: Does it matter in terms of venture performance? in
P. Reynolds, W. D., Bygrave, N. C., Carter, S., Manigart, C., Mason, G., Meyer, & K.,
Shaver (Eds.), Frontiers of Entrepreneurship Research.

Stevenson, H.H., Roberts, M.J., Grousbeck, H.I., 1985. New Business Ventures and the
Entrepreneur. Irwin, Homewood, IL.

Venkataraman, S., 1997. The distinctive domain of entrepreneurship research: an editor’s

perspective. In: Katz, J., Brockhaus, R. (Eds.), Advances in Entrepreneurship, Firm
Emergence, and Growth, vol. 3, pp. 119–138.

Williams, N., & Williams, C. C., (2014), ―Beyond necessity versus opportunity
entrepreneurship: some lessons from English deprived urban neighborhoods‖, International
Entrepreneurship and Management Journal, vol. 10, no. 1, pp. 23-40.

Zimmerer, T.W. and Scarborough, N.M. (2008) Essentials of Entrepreneurship and Small
Business Management, p.5, Pearson Education Inc., Upper Saddle River, New Jersey.

10 | P a g e