Responding to Readers About New Research on Entrepreneurs

Posted by: Nick Leiber on July 24, 2009

This is a guest post by BusinessWeek contributor Vivek Wadhwa.

vivek_wadhwa.jpgOne thing I’ve learned after joining academia is that with every research project, you create more questions than you answer. My team’s new research on the backgrounds and motivations of company founders in high-growth industries uncovered some very interesting facts which I highlighted in this slide show. (It will go live later this afternoon.) We shattered many myths and gained a much better understanding of what makes entrepreneurs tick. But readers have asked some provocative questions which I would welcome your input on. For example, Stephen Duke wrote:

There are lots of “independent business owners,” but few are actually “entrepreneurs.” Most are skilled technicians or managers in their fields and they work IN their own business, but fewer still work ON their business. There is a difference.

Self-employment is on one end of the continuum and Entrepreneurship is on the opposite. The difference is what the individual actually does for the business: Are they simply doing what they were doing for the “Man” before they started working for themselves? Or, are they working at building a “world class company” that does the things they once did for a living?

Don’t be delusional about self-employment, even if you are not working by yourself - it is still not entrepreneurial. One must really be working on building a company that is less egoistic and more centered around its stakeholders i.e. what’s in it for them, instead of what’s in it for me. When you understand this, you understand the difference between the self-employed business owner and the entrepreneur.

We surveyed 549 founders of successful companies in high-growth industries which were listed in the OneSource Information Services Companies database. This didn’t include many independent business owners. But Stephen asks an intriguing question: what is the difference between an independent business owner and an entrepreneur?

Domenick Celentano, who is an Adjunct Professor at Fairleigh Dickinson University, says the difference is in scalability and replicability — small business people don’t address these issues. He calls small business people “Artisan Entrepreneurs.”

But I don’t think it’s that simple. After all, don’t independent business owners bet their life savings and risk it all with the dream of making it big? To me, that’s what defines an entrepreneur, regardless of the size of business.

Alison Steele Mandadi, owner of Steele Environmental Services of Houston, Texas sent me an email with another great observation — that we didn’t differentiate between male entrepreneurs and female. Here is what she wrote:

I wonder if you might be mixing apples and bananas if you’ve lumped females and males into a statistical analysis that attempts to assess motivation. I fit your average entrepreneur profile in coming from an upper-lower-class background, having an advanced degree, and in having graduated at the very top of my class. But I depart significantly in being a first-generation immigrant single mother who is not in it for the cash. I was motivated to start a company in large part because I wanted more control over my time so that I could be more responsive to my daughter’s educational and extracurricular schedule, given that I had next to no logistical support from a spouse or extended family. The math was simple; I knew I could make the same money in less time if I worked for myself, thereby freeing up time for her.

She makes a good point and we do plan to analyze our data to see if we can determine any differences in motivation and background between the sexes. But what do you folks think? I would welcome your insights and more questions.

Vivek Wadhwa is a Senior Research Associate at the Labor and Worklife Program at Harvard Law School and Executive in Residence at Pratt School of Engineering at Duke University. Before joining academia in 2005, he was an entrepreneur who founded two technology companies.

Reader Comments

Alison Steele Mandadi

July 24, 2009 05:43 PM

I disagree with Stephen Duke's definition of entrepreneur. He's only describing a narrow "Bill Gates-ish" slice of the experience. I find it to be a static view that doesn't account for the mercurial nature of the Gestalt. Saying that a technically-oriented business lacks entrepreneurial essence is like saying that a child lacks adult capacities. Entrepreneurial endeavors are utterly dynamic and, even if any given business owner appears on the surface to be somewhat rote, that's only a snapshot view of a process that could (and often does) morph in any direction. The "world class company" to which Mr. Duke refers does not appear spontaneously overnight. It grows on a foundation of the basics, most of which are 99% perspiration.

Wilma Brandt

July 24, 2009 08:57 PM

I am a woman. I own a small business in Wurzburg, Germany. I consider myself an entrepreneur. I agree with Alison!

Han Li

July 24, 2009 09:12 PM

I think both same. Everyone who start company becomes an entrepreneur. I liked reading the report.

Sandra Miller

July 24, 2009 10:21 PM

Perhaps a finer distinction of "entrepreneur" can be arrived at by thinking about who is a founder or co-founder of the start-up. The founder or members of a founding team literally birth the idea for the company. They play a critical role in the first few years of the company, particularly a technology-based company, when the focus of those initial years is typically to prove feasibility, develop and refine the product and begin sales. At that point a professional CEO can be brought on board who has experience in managing an early stage company selling nationally or globally. That CEO can also be entrepreneurial (they are often called "serial entrepreneurs"), but they are not a founder, which may be thought of as the extreme edge of entrepreneurship.

Willie G

July 24, 2009 10:38 PM

Good question. Is a doctor or a lawyer an entrepreneur when they open their private practice? Never thought about this one before.

Nelson Wakefield

July 24, 2009 10:44 PM

They are the same. Anyone who takes the risk is an entrepreneur.

Gita Dang

July 25, 2009 01:37 AM

As per Frank H. Knight (1921) and Peter Drucker (1970) entrepreneurship is about taking risk. The behavior of the entrepreneur reflects a kind of person willing to put his or her career and financial security on the line and take risks in the name of an idea, spending much time as well as capital ..This concept does equate Self Employed and Entrepreneurs and distinguishes them from the "Company Man". To people who work in corporates self employed = entrepreneurship. I find this distinction being raised more by by entrepreneurs who have built scale and like defining a pecking order which places them at the top of the heap and the Self employed at the bottom.

ashilnga

July 25, 2009 01:43 AM

Whenever you see Wadwha's name attached to any study that shows tech companies are lacking something, you know he's gearing up to release subsequent "research" papers showing that what they need to fix their problem is to import more guest workers.. watch. Within a month, "best and brightest research advertisement #1232423" will be released.

Vikram Narayan

July 25, 2009 05:17 AM

I live in India where there are a vast number of self-employed people. These people run sell food on street corners or run corner grocery stores. In this context, I believe that the motivation of somebody who is self-employed and somebody who is an entrepreneur are vastly different. The self-employed person does it either because he could not find work in a big corporation or because he does not want to work for somebody else or because he needs to survive. He's either looking for a lifestyle business or is too disillusioned to try and scale up the business thus settling for a comfortable existence at best. The entrepreneur on the other hand is hungry. Hungry for recognition, hungry to make a big change, hungry for financial success. His hunger is not for survival but for something that's larger. So while he may still be struggling for survival, if the business person has hunger for making a large impact, then it qualifies him (or her) as an entrepreneur. It will reflect in his activities and his business.

samantha crawford

July 25, 2009 10:42 AM

Professor, there is very little hard research on the role of women in entrepreneurship. Even the work you have done is new and adds a lot. I would like to see you and others researching this.

Geri Stengel

July 25, 2009 05:51 PM

Anatomy of an Entrepreneur certainly provides interesting insights. But, as Vivek said, research creates more questions than it answers. In fact, I’m so curious about how the use of resources (e.g. business association membership, enrolling in classes online or in person, networking, seek advice/guidance from professionals or peers, etc.) correlates with success, my company, Ventureneer.com is conducting its own research. Entrepreneurs and small business people can take the survey at bit.ly/yV2GF. Results will also be shared for free.

S M

July 25, 2009 10:03 PM

I agree with Stephen Duke broadly but I see it entirely differently as explained in 2nd para . I don't agree with his egoistic part concept. I am sure many of you will agree that there are successful businessmen and women who are extremely egoistic and successful businessmen and women who are plain Joe/Jane. The head weight can be there to start with or can come after becoming successful. Ego and rubbing people the wrong way might not help but we cannot prove that egoism will stop one from becoming successful. Also, No Entrepreneur will be entirely selfless and centered around others. I believe his understanding of Entrepreneurship requires consideration for stakeholders and I do not disagree with that part. His first statement of "One must really be working on building a company that is less egoistic and more centered around its stakeholders" is ok but the explanation "i.e. what’s in it for them, instead of what’s in it for me" does not fly with me. Entrepreneurs take risk to get high rewards in terms of money, name and fame or what ever they intend to accomplish, not just for the sake of stakeholders. Social Entrepreneurs are probably different and they may not have the same goals as normal Entrepreneurs do.

To me, Entrepreneurship is any form of business that involves significant amount of risk. Risk is what differentiates a perennial self employed business man or consultant (for example, Some one who works on a 1099 for an indefinite period or has no hunger for some thing larger) from an entrepreneur. Many times the path to Entrepreneurship is via the self employment of a potential business owner or the consultant. The stage of self employment offers a path forward and backward based on the success and failure in that stage. This transitional phase can be of very short duration and may go unnoticed or unaccounted. How ever, there are other folks who take the plunge right off the bat because they are aggressive in nature or because they do know that they have a successful solution in hand and that they can execute it to perfection.

I have to agree with Allison on the Bill Gate's slice of experience. Every venture is different and are not comparable. Even Stephen might not have meant so, but his choice of words definitely leaves room for different interpretations.

Steve Millar

July 26, 2009 12:05 AM

Delightful and educational discussion. My view is that anyone who ventures out on their own qualifies as an entrepreneur. And women may have different motivations as Alison points out.

Cheers!

John G

July 26, 2009 10:51 AM

I read on the other blog that there is a part 2 of this report coming out also. I am really interested in reading more! This is good stuff and I learned that I am not atypical. Started my business when I was 40 and came from a middle class family.

I started as a contractor, but I have 3 people that work for me now. I was an entrepreneur when I started my consulting firm and I am an entrepreneur now.

Goldbaum

July 26, 2009 08:07 PM

I am surprised to read the diversity of opinion posted here. I took it for granted that anyone who starts a company is an entrepreneur but as some people here have pointed out, may be it isn't that straightforward.

Good report, Prof!

Becky D

July 26, 2009 09:09 PM

Interesting debate. When I was 14 I was self-employed as a professional dog-walker (serving over 20 different clients within a 1 mile radius of my home, and making over $3,000 in a 3-month period). While I originally started out with just my neighbors, I saw an opportunity and began to advertise - which grew my client list. I did this as a way to make money, and it was something I truly enjoyed doing. When I graduated from HS, my mom wanted me to experience "working for someone else" so I got a job at a local grocery store and absolutely hated it. I worked both jobs through college until I was forced to "retire" from dog walking due to school constraints. Now that I'm in an MBA program studying Entrepreneurial Studies, I do plan to start my own business again and grow the business nationally.

My point is, that I started out self-employed out of convenience, but grew to become what I now consider a "beginning Entrepreneur". I think this probably happens a lot - someone starts out as self-employed, but finds its something they love to do and make a real "business" out of it. To me, self-employment is step 1... entrepreneurship is step 2.

Aditya

July 27, 2009 02:43 AM

Try doing some research OUTSIDE of the "US of A".....

Gita Dang

July 27, 2009 10:37 AM

1. I have noticed that from a motivation perspective women lose patience with the corporate noise and politics of the old boy networks and decide to drop out and become entrepreneurs.
2. A large number of women executives are really not interested in going 'all out" to get the CEO job and consequently decide to follow their passion which is often outside the company structure.

sharon g

July 27, 2009 11:51 AM

Enlightening research and comments. There is little doubt that women have different and more noble motivations. Anyone who starts a company is an entrepreneur because of the risk they take.

Zoe Watkins

July 27, 2009 10:01 PM

This is a really very interesting blog. The comments here have made me challenge my own preconceptions about entrepreneurship. I do think that women are different. I am like Alison.

J. Burnie

July 27, 2009 10:07 PM

I started as a consultant. Grew my client base, hired one consultant then another to the point that I have 23 on the payroll now. I was an entrepreneur when I started my business and am an entrepreneur now. How can anyone compare me to a grocer or say I'm not a risk-taker???

Sarah K.

July 28, 2009 04:49 PM

Very cool discussion. I found some of these comments as interesting as the slide show! Me thinks women are more passionate and motivated than men. We're also more entrepreneural!

S M

July 28, 2009 08:50 PM

@ J Burnie,

If you look at my previous comment, you are exactly the Entrepreneur I was talking about who was(not is) a self employed individual. If you had not grown as you did and had stayed as a consultant as you were when you started, would you have still considered yourself an Entrepreneur?

Domenick Celentano

July 29, 2009 09:38 PM

Well, apparently this topic has really struck a chord. Let me try to be succinct in addressing many of the posts along with my personal viewpoint on Entrepreneurship. So let’s see… where do I begin?

I agree with Stephen Dukes assessment of the spectrum… self employment on one end and Entrepreneurship at the opposite. I love the “working in vs. working on the business” example. It is congruent with my thoughts that Entrepreneurs work on Scalability and Replicability, Whereas Small Business people are ok with where they are and are not interested in the above. The emotional attachment to either Small Business or Entrepreneurship is just that… emotional attachment or personal opinion. There is nothing wrong with going in either the Entrepreneurial direction or Small Business (technician or artisan as it is called in Academia) direction. We need both!

Becky D makes a great case in her posting. Just for full disclosure, Becky is a student in my Small Business class out here at Fairleigh Dickinson University. Her initial introduction to Self Employment appears to be out of necessity. However I wonder if she would have studied Entrepreneurship without the self employment experience and then comparing it to working for someone else?

There is a great Harvard Business Review article titled “Why Entrepreneurs Don’t Scale”. I urge you all to consider reading it. The author points to four areas: 1. Loyalty to Comrades, 2 Task Orientation, 3. Single-mindedness, 4. Working in isolation. I bring this article up because it puts forth the qualities that are important in starting a business, get in the way of Scaling the business.

We all are familiar with McDonalds and the founder. Ray Kroc. He understood Scalability and Replicability. Regardless of ones opinion on the quality or healthfulness of McDonalds, there is not doubt they are experts at replication. No matter where you go, McDonalds is McDonalds… consistency is something they have mastered. And no doubt they know how to take the replicable process and scale it across over 31,000 units worldwide.

To Vivek, I hope you periodically update the research and continue to post on this most interesting topic. Keep up the great work. Hopefully before the summer semester ends, our class will create a group posting based on this fascinating subject.

Entrepreneurs and Small Business people… we need both of them!

Dom

gita dang

July 30, 2009 01:06 AM

doesn't the risk of "scaling up " move you away from the entrepreneurial streak that inspires some to move out of a company and the issues of feeling dis-connected. If you are going to build it up and hire managers to run the business what does it do to the entrepreneurial spirit that inspired the move ?

Mark Aickt

July 30, 2009 12:49 PM

This is the most interesting discussion I have read on this subject and am particular interested in the difference between men and women entrepreneurs.

Is there not any research which informs on the differences between these two? I am surprised that we know so little about such an important distinction.

I downloaded the report and found very interesting statistics in this about general entrepreneurs. But the report did not detail the differences as noted.

Prof. Roedler

July 31, 2009 02:45 PM

Prof. Wadhwa has done a marvelous job of documenting some of the basics of entrepreneurship and highlighting how little we know about something of such importance.

I hope this leads to substantial new research.

Domenick Celentano

July 31, 2009 03:59 PM

Gita, check at the blog http://blogs.harvardbusiness.org/tjan/2009/04/why-do-most-entrepreneurs-fail.html. It is a shorter version of the Harvard Business Review article on Why Entrepreneurs Dont Scale.

Scaling is part of Entepreneurship... if an person is a true Entrepreneur they either learn the skills to manage a larger entity. An entpreneurs highest value is to consistently deliver the vision message and identify opportunities. Or if they cant or dont want to do this, they can sell the business, harvest their hard work, and start over again... hence the term serial entrepreneur...

Dom
Fairleigh Dickinson University

Dimitri M

August 2, 2009 12:04 PM

I read about this excellent Kauffman study on several blogs and found my way to the source!

I want to ask if there is more research like this which helps people like me understand their options. I am 46 and was afraid that I would be like a woman wanting to conceive at this age. What this research tells me is that someone my age starting a company is normal and the company will probably be very healthy!

Thank you to Kauffman, Businessweek and professor.

Chris Evans

August 3, 2009 05:26 PM

I've started and sold three businesses since college and started two while grade school. To me there’s a stark difference between an entrepreneur and a business owner. An entrepreneur is a pioneer, they are making something new, and I think are always trying to grow it into something more. A business owner manages a (hopefully) stable platform as a vocation. It’s the difference between a test pilot and a commercial pilot. The former takes the job because of the unknown. The latter’s goal is for there to be no unknows.

Senthil Velmurugan

August 5, 2009 06:10 PM

It is a good research initiative which positively contributes to the promotion of entrepreneurship in readers mind. In a broader sense, grossly, the objective of the research is met.

A right title could be "Anatomy of 529 US Entrepreneurs". Something palatable for global audience.

IMO any one who makes money by not being an employee is a businessmen and when they employ 1 or more living being, they can be called as an entrepreneur, in a broad sense.

Since, one Latin word is insufficient to classify all of them, different culture tries to glorify (define?) the term with different entry bar and qualification terms.

Thanks for nice contributions from many which further refines the interpretation of the results.

Murali Bashyam

August 17, 2009 09:38 AM

I don't think there is a difference between a small business owner and an entrepreneur. What does an entrepreneur do? They create something that didn't exist before. What does a small business owner do? They create something that doesn't exist before as well. A small business owner is also someone who does more than just 'maintain'. They have more at risk than just a salary, thus I would say that there really is no difference between an entrepreneur and a small business owner. Both create something that didn't exist and do so with risk that is much great than working for someone else. This just sounds like an attempt by some entrepreneurs who think too highly of themselves to create a distinction where one does not exist.

Vivek Wadhwa

August 17, 2009 11:23 AM

Murali, you make a forceful point, but as an immigration lawyer, are you an entrepreneur? Did you consider yourself to be taking a risk when you started your law firm?

I am still on the fence on this subject. The comments here are very helpful.

Murali Bashyam

August 17, 2009 01:29 PM

Vivek, here is the answer to your question, and perhaps this will help define the issue more clearly. Humans like to place 'identifiers' on others. If you walk into a party or an event, the first question a person asks you is, "what do you do?" That is always a hard question to answer because I don't feel defined by my profession. You defined me in your post as an immigration lawyer, and thus asked me if I am an entrepreneur. Immigration law is only one aspect of what I do. When I started the law firm, which is basically right out of law school 14 years ago, I had to ask myself whether I could do it, afford it, make it etc. This wasn't relating to the law, this was related to the business. These are the same questions entrepreneurs ask themselves before embarking on a venture. I dare say that the creative, financial, and business aspects of being a small business owner overshadow my day. I also feel that the financial risk involved in this failing is much greater than if I had taken a job at a law firm. Right now, we have grown this business from 1 person to 9, and have made creative decisions along the way to enhance effectiveness and deliver a better service. Isn't that what entrepreneurs do? I also say that if there's stress and sweat involved in this context, you are an entrepreneur. I don't know of any small business owner who works 9-5, doesn't think about their business almost all of the time, and have some level of anxiety at times about moving their business forward or keeping it afloat. Wouldn't you agree?

shanna

February 6, 2010 11:44 PM

Two comments:
1) I am planning to start my own business - My motivation is similar to Alison. I want to have a flexible schedule in order to be able to be with my son. My financial motivation is the same. I may work the same number of hours as I would in a "normal job" - but I can make my time more flexible.
2) The interpretation in your report that the "average entrepreneur" is a second child is misleading. I think you should be using mode not average here. It doesn't make sense when you are talking about birth order to average a first child with a third child and come up with a second chil.

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