Entrepreneurship Theory and Practice

Entrepreneurs’ timeframes for the birth and early development of new ventures offers a new lens for understanding the psychology and social construction of new organizations. This paper reviews the temporal aspects of new venture intentions. A model that features temporal brackets is presented.

The decision to become an entrepreneur is considered as an alternative to wage labor. The potential entrepreneur evaluates whether there are positive expected net present benefits of entrepreneurship relative to the expected gains from wage labor. The expected net gain from entrepreneurship depends both on the average income from successful entrepreneurship weighted by the probability of success and the average income from wage labor weighted by the probability of employment. The inclusion of economic factors not only adds to the understanding of entrepreneurship but suggests avenues by which policy makers can encourage entrepreneurship.

A model of employment status (self-employed vs. wage-or-salary employed) choice based on psychological, sociological and cognitive variables resolves the traditional shortcomings of occupational tracking models (general applicability, black box treatment of individual processes, and tracking exceptions or “failures”) by using the cognitive heuristics of availability, representativeness and adjustment from an anchor. The model is presented, its components and processes are described, it is partially operationalized in a small example, and implications for future use are briefly considered.

This paper attempts to explain the observations that not all Individuals have the potential to found organizations, and that of those who do, not all try or succeed. Three dimensions to organization formation are proposed: propensity to found, intention to found, and sense making. These three dimensions lead to a decision to found the venture, or to abandon the attempt. Several propositions are derived from the model.

Much of the previous research attempting to relate traits of the entrepreneur to new venture creation has failed to demonstrate a definitive linkage. This failure should not impugn the importance of the individual as the most cogent unit of analysis In entrepreneurship research and theory. On the contrary, since most new organizations are Initiated and created by individuals operating alone or in small teams, it should motivate new ways of modeling and testing the human phenomena involved In venture creation. Accordingly, this paper presents a structural model of the initiation of new venture creation which links psychological and behavioral concepts with those of organization theory to explain the initiation of launch activities for new business enterprises.

A model of the relationships between pre-organlzational Information processing and environmental load specifies an interaction effect on new organization creation. The model proposes that levels of Information-processing ability In pre-organlzational networks can be either superoptimal or suboptimal relative to the levels of environmental load encountered by intending entrepreneurs. Either condition will reduce the likelihood that the entrepreneurs’ Intentions will be realized. However, when an appropriate balance between Information-processing ability and environmental load Is achieved, the likelihood of new organization creation increases. Environmental load Is described in terms of information load and information diversity. Entrepreneurs’ information-processing ability is specified In terms of pre-organlzational size, interconnectivity, and frequency of communication.

This model applies theories of organizational socialization to characterize the aspiring entrepreneur's journey from neophyte to firm founder and to Identify factors that may Influence the transition from a pre-organization to the formation of a new organization. The model distinguishes two identifiable stages which shape organization formation—Anticipatory Socialization and New Entrepreneur Socialization. Anticipatory Socialization characterizes the predisposing characteristics and experiences that precede the cognitive choice to become an entrepreneur. New Entrepreneur Socialization specifies the critical variables that Influence the new recruit once the decision Is made to start a firm. Three factors determine the transition into the entrepreneurial role: Motivational Bases for Adaptation, Socializing Agents and the Structural Context of the Entrepreneurial Setting. The eventual outcome of entrepreneurial socialization, Organization Formation, Is the survival or discontinuance of the venture. A model of entrepreneurial socialization focuses attention on the adaptive Intra-personal and Inter-personal processes that shape the new venture creation process.