\

1042-2587-91-162$1.50
Copyright1991by
BaylorUniversity

Person,Process,Choice:
The Psychologyof New
Venture Creation
KellyG. Shaver
LindaR. Scott
Psychologycan be distinguishedfrom other behavioralsciencesby its emphasison the
behaviorof the individualperson.Behavior,in turn, is influenceJoy ttre way in wnicn ine
externalworld is representedin the mind,and by the individual'sexercise6f choice.Trre
article examinesthe Possibility.thatrelatively endirringattributesof the perion riltri "tr""t
entrepreneurialactivity, describesthe social cognitive processesinvolvetl in conitructing
representationsof the externalenvironment,and suglests which motivationalvariables
affect behavioralchoices.Although past researchon ';lf,e psychologyof the entrepren"ui',
llag-notbeen productiv-e,a psychologicalapproachbasedbn'persons,process,and cnoice
holds promise for the future.

rln

best scientific form, researchersinterestedin the creation of new business

ventureshave attemptedto constructdefinitions of entrepreneurship.A philosophical
foundationfor the term is providedin J. S. Mill's treatisebnpolitical ".onorny
1iA+A;,
in_which the assumptionof risk is assertedas a key ingredientof "nt."pr"neuriai activity.
Modern use of the term is usually credited to Schumpeter(1934), who emphasized
innovationand its role in destabilizationof economicsystems.The discipline'sattention
'' n shiftedfrom the
act to theactors, with McClellan-d's(1961) assertibnthat qualities
ar's(ociated
with a high need for achievement-preference for challenge, acceptanceof
personalresponsibilityfor outcomes,innovativeness-characterized
suicessful-initiators
of new businesses.
This focus on personalcharacteristics
continued(e.g., Dunkelberg&
pickle, 1964;Timmons, lvoa1, despite'its
looper, 1982; Hornaday & Aboud, l97l;
(e.g., Brockhaus,1980;Brockhaus& Horwirz, l9g6; carsrud, oim, a nooy,
!{lures
1986) and limitations (Wortman, 1987), until Gartner (1988) challengedthe whoie
approachby arguing that the behavior of creating a new venture, not thJpersonality of
the founder, should be fundamental to the definition.
- _Predictably,therehas been a rejoinderto the challenge(carland, Hoy, & carland,
continueto flourJ?8!), T-d paperslisting the personalcharacteristicsof entrepreneurs
ish (Mcclelland, 1987;solomon& winslow, 1988;winslow& Solomon,l9g9). Moreover, becausethe act of creating an organization cannot occur in isolation, other
researchershave attemptedto specify aspectsof the social (Carsrud& Johnson, l9g9)
and economic (Hornaday, 1990) contexi in which such innovation takes place. In the
extreme, the contextualistposition deniesthat the personalcharacteristicsof organization founders contribute anything of importancetb the successof the venture"(e.g.,
1989), regardlessof whether the contribution originatesin personalityor in
ll.d.i".h,
behavior.
In summary, a substantialamount of journal spacehas been devoted to the attempt
Wnter,199

ZJ

to define"entrepreneurship,"
but no consensus-has
emerged.
Notwithstanding
this lack
of agreement
on a fundamentalterm, therehasbeentremindousgrowth in tnE
stuayor
venturecreation.lndeed,a recentsoftwarepackage(EntreBIB-Fc)
cataloguesn"Lry
l4'000 relevantentries'we endorse
Mitton's(198i) conclusion
that'entreprJn"u.ririp
i.
like obscenity:
Nobodyagreeswhatit is, but we all knowit whenwe seeit.' In
the
face
of such-controversy,prudencedictatesadherence
to op".utionuldefinitions,,o irrir,"
remainderof this paperwe shall be discussing"new^venture
creation,,,ratherthan
"entrepreneurship.
"
FUNDAMENTALS OF A PSYCHOLOGICAL PERSPECTIVE
llaving limitedourselves
to an accountof "new venturecreation,,,we believeit is
usefulto describethe essentialingredientsof a psychologicalapproach
to the study-of
anyphenomenon.
Most of you will recognizethai we havJjump"ot o- onedefinitional
thicket to another.Thereare psychologists
who studythe ;;sJJiu. pu-p,'-tr," "i""_
trochemicalprocessthroughwhich changesin ion concentrations
at the cell membrane
produceactionpotentialsin nervecells. Therearepsychologists
who investigatemailematicalreasoningprocesses
in toddlers.And therearepsyciotogistswho eiamine the
waysin whichentirecommunities
mobilizein response
to calam"itier.
rr urt"Jio gi;"
their particularoutlookson p_sychology,
thesevariousresearchers
might generatenearly
the controversyfound in definitionsof entrepreneurship.
Despitethis potentialfor dispute,psychologists
havebeenableto agreeon certain
coreideas,andthesearerecountedin our introJuctorytextbooksto delimit
the domain
of inquiry(e.g.,Shaver& Tarpy,in press).As a disciiline,psychorogy
is rarelyaennea
as the sum of the activitiesof its practitioners.
Rather,it is"oistinidsrrear.om oitrer
socialor behavioralsciences,
suchas sociology,anthropology,
uni".ono-i"s, uy-ii.
emphasis
on the individualpersonasthelevelof analysii.wTitrinthis concentration
on
the indivirlualQterson),two of psychology's
coretheoretical
concernshavebeenthe
contentsof mind (theprocessinterveningbetweenexternalworld and
observablebehavior),andthe exerciseof freechoice.
Emphasis on the Person
Thebasisfor theboundarydistinctionis.theunitof analysis.Whereanthropologists
emphasize
culturalinfluences
on actions,andsociologists
emphasize
socialstructure
and
organization,
psychologists
concentrate
on individuJs.A translation
of
the
Greek
roots
of the discipline'stitle wouldbe "the studyof humanspiritor soul.,, Although
there
havebeendiverse,if not to saycontradictory,
descriptioni
of whata humanspiJt, soul,
or mindmightbe like, psychology
hasalwaysrecognized
thatwhateverthediscription,
a mindexistswithina singleindividual.Consequeritly,
psychologists
arepredisposed
to
searchfor explanatoryconceptsthat can be located*ittrin the person.'For
example,
whenattemptingto accountfgr the aggressive
behaviorfound in collections"f ;;tmousindividuals,thesociologist
(1895)
LeBon
was
comfortable
with a notiontt" te.*Jo
"the Group
Mind." In the.h.""9:of socialpsychologists,
thisgroup-based
prrenomenon
wastransformed
into individualized
processes
of be[avioralcdntagion(Wheeler,1966)
l' A recent paper by Funder and Dobroth (1987) investigated
the ease of judgment of 100 personality
characteristics,and found that among the l5 with the highe;t level
of interjudge agreementwere .'tends to
arouseliking and acceptance,""behaves in an assertivJfashion," "is
a taikaiive individual," ,.rebellious
and nonconforming," and "power oriented." These traits could easily
be part of Mitton'siescripil"",
"r
the "compleat entrepreneur," so it may be that we all do know
ona *h.n',r" see one.

24

ENTREPRENEURSHIP
IHEORYond p|?ACT|CE

or deindividuation(Zimbardo,rg70).Not j.ust-group
action,but arsogroupinaction,is
interpretedby psychologistsin individualized-terms.
wff
a murder in New york
occurredbeforea largegroupof onlookers-virtually
non" oirhom intervened-social
commentators
werecontentwith explanations
in termsof ..uputhy,,(Rosenthal,,J,&i).
But experiments
designedasanatogues
of ther"irirg r9onrylilorogirt. to anexplanation
in termsof a sequence
of decisionimadeby eachfirai"ii"1"i'ilatan6
& Darley, 1970).
Thusthe first elementof a psychologicalapproach
to new u"niur" creationis a focuson
the person.
This view obviouslycontrastswith the extreme
contextualist
descriptionof new
venturecreation.2
For.tfiepsychologist,
it is not enoughiotnl* trruta certainnumber
of peoplewil respondto tie."push"',of beingrurtoultJ,'o.
to tn. ..puil,, of market
portunitiesby startingbusinesses
on the.ir"own.n?-,-r,..,"ti.pry.torogist wants
to
Rlow whichfew of thehundreds
laid off will createn"* u"ntui"s,or why not
everyone
sees-and capitalizesupon-the markeropportunity.
A word "a;;ifi
i;;;;;r,
history of the entrepreneurship
riterature,..this
broadpsychorogicar
approach
has been
inadequately
represintedby itudies oi"'trre.per_sonality
of itre entrepreneur.,,
The
f*g:lv fruitlessquestfor ttrepersonalityprofile or trresuccessfulorganizationfounder
is whatpsychologists.would
calla persliotogicat"no"uuo..Suchsearches
for transsituationalconsistency
in-p_ersonality
traits went.out of style in psychologyover twenry
yearsago,whenMiichel (1968);;";J;^luriu"tyit
at'b"h;;i;, shourdberegarded
as
the consequence
of person-situatioin
intfractions.withourrecountingalt of the subsequenttheoreticar
discussions
(e.g., seeFunder& Dobroth,-tggl, Kenrick
& Funder,
1988)'sufficeit to saythatpsych-oiogy's
emphasis
on it" p".r"" astheunit of analysis
encompasses
both techniques
andprocesses
well beyondihe identificatio.oi ,p"iii"
personalityvariablespresumedto Gadto the
foundi;g ;; n"*'orgunirations.
The Process of Representing the External
World
Throughoutits history, psychologyhas recognized
the biological foundationfor
humanand animalbehavi,or,-eiamin#the
contentsof mind, assumed
that therewere
I ts to rationalitv.andnotedthe.importance
of theimmediaiesocialcontext.But each
of-these
elements
of thepsyc.horogilul'upioach
depends
on thepresence
"mental
of at leasrsome
furniture"that originaLoouiiioe.tt. orgunr.-."i"iti.
sense,
psychorogy
follows in the Aristoteliantridition of empiricism,"rather
platonic view that
ttran
tne
sensoryinformationis mereflickeringshadows
on thecavewall. consequently,it is not
surprisingthat the oris_inaltruly psyciorogicar
ry,1"0 *",'plyrnopnyrjcs, the srudyof
the relationshipbetweenexternaisiimulationand
theinternalpsychologicalexperience
the individual' specificationof the processby
which thetternal world becomes
-oj
represented
in the mind is the first of psychology'."or" ron.".n,
that is fundamentalto
a psychologicalapproachto new u"niui" creation.
Becausepsychologycombinesexternal
-- circumstances
with intrapsychicprocesses,
it canbe definedby Gwin's expression,
B : fiP, E),
meaningthat behavioris a functionof both person
and environment(Lewin, in cart_
wright, l95l)' Neitheraloneconstitutes
a sufficientexplanationfor an individual,s
2.SeeGergen(l982)foranoutlineofthecontextua|istposition,no,,.no'o,,ffi

arenegotiated
within
theinterpersonar
context"
3:y"i11':iiifj
rhus,
:lfjT3::::.:"",,x,1,3:;*:.:ii.1:l1T:.u1,nc,
rikethecontextuarist
position
*i,r'r"
"r*
,."ffi
.ffifiil1ffiJ'iln,rilHffJ,'fJ^j
searchfor any transsituationally
enduringp"rronui .n_ucteristics.

\Mnter,199,l

observablebehavior.Although a person'scultural milieu and his or her membershipin

various social networks and organizationscertainly influence action, study of these
factors in their own right is beyond the purview of psychology. The psychological
questionis how a person'scultural heritageand social neiworks be"o*" ieir"r"ntJd in
mind. Answers to this questionhave coveredthe entire rangeof possibilities.
For example, the first generaltheoreticalapproachin psycholbgy,known as structurali1m, attemptedto specifythe irreducibleelementsof mind, the psychologicalbuilding blocks from which all aspectsof consciousexperiencewere constructed(Titchener,
1898). In contrast,where structuralismconcentratedalmost exclusively on mental experience,behaviorism,at leastas first outlined by Watson, deniedthat anything useful
to psychologycould ever be learnedfrom the analysisof consciousthoughl: "T-he time
seemsto havecome when psychologymust discardall referenceto consciousness;
when
it need no longer deludeitself into thinking that it is making mental statesthe object of
observation" (watson, 1913, p. 16l). For his part, Freud argued that uncon"scious
desiresand fears, not consciousthought, were the principal motivating forces behind
behavior. Not only did he believe this true in casesbt ctinicat disturbaice, but also in
everydaylife (Freud, [190111960).Finally, William James(1890)constructeda complete model of the self by distinguishingthe ongoing streamof consciousness(the I)
from the material and psychologicalobjects of reflection (the Me). As suggestedby
recentexponentialgrowth in what has becomeknown as "cognitive science,; modern
psychologicaltheory has rejectedWatson'sextremebehavioriim in favor of a metatheoretical stancethat gives consciousness
a fundamentalrole in human action. Thus a
psychologicalapproachto new venturecreationmust involve cognitive processesthat
occur within the individual person.
This point is convincingly madeby consideringa behaviorwith a long history in the
analysisof new venture creation-the assumptionof risk. Whether onJ reads tutitt ot
asks one's local venture capitalist, one learns that the founding of a new business
organizationinvolves significantrisk. Yet reviews of researchhave often failed to find
ri_s\laking propensityassociatedwith successin new venturecreation(e.g., Brockhaus,
1980, 1987). Putting aside, for the moment, the possibility of flawed measurement
procedures,there is an explanationfor this inconsistencyin terms of the cognitive
processesinvolved. Objectively, a certain proportion of new businessesfail, and in a
purely statisticalsense,the failure ratefor a particulartype of new businessis a plausible
index of the riskiness of venturesof that sort. Now the personologicalappioach to
businessentry has assumedthat everyoneagreeson the level of risk involved, and that
somepeople(entrepreneurs)
are constitutionallymore willing to take the chancethan are
other people(non-entrepreneurs).
A variety of well-known cognitiveprocessessuggests
an important alternativeexplanation:Perhapsthosewho found businissesdo nolittrt
about the risks in these statistical terms. For example, a study of high-technology
entrepreneursfound that 213 of the sample did not perceive themselves to be doine
somethingrisky (Corman,Perles,& Vancini, 1988).One must have fear to demonstrati
courage.Ratherthan continuingthe vain searchfor personologicalrisk-assumption,we
should begin to study the cognitive processesinvolved in risk assessment.
In ihort, we
needto know how the businessworld is represented
in the cognitionsof peoplewho do,
and people who do not, found new ventures. We shall return to the isJue of riskassumptionlater.
The Crucial Role of Choice
Beyond the question of how the external world becomesrepresentedin the person
lies anotherof psychology'straditional disciplinary concerns.this is the conciptural
26

ENTREPRENEURSHIP
THEOI?Y
ond PMCTICE

quagmire of determinismversusfree will. Psy-chology

has Descartes(1952 [1641]) to
thank for tlling the problem. In cartesian dualism, iii.
u.ov *"s a material substance,
constrainedby the laws of physics, but the will was unextended
and incolporeal,
free of-physicallimits. suCni view leadsto a position ..indeterminisp,,-1[s utterly
of
s1s1cise of will cannot be.predictedany more thin it can
be controlled. Accepting this
position would put psychologists,and others*tro r"*"h
foi relularities in behavior, out
of business. Fortunately foi psychorogy, dualism founders
o"nit, fuilu." ; ;p;;if; "
plausible mechanism for inteiaction between-the
mind (will) and the body.
The extreme philosophical alternativeto dualism is ttre
maierialist identity theory, a
monism that equates.-l1o with brain (churchrand, 19gg).
tn-principte (if not in facr,
becauseof technological limitations), ali mental events
a.e, si.,lttuneously, neurochemical e.ventsin
!h9 physical brain. Not surprisingly, ia"niity trreory takes the form of
lard"
determinism.
Statedin the extrem", ir ai-"ntd u"tiuity is actuallyn"u-.h"*--ical activity in the brain, then that neurochemicalactivity
.urt-tiuu" had somepreceding
cause, and that causemust have had some preceding ciuse,
until ultimat"ry tf,. ."lr.rsion reachesthe joining of spermand egg to form ,n&-u.y""i"
human, and that joining
is the result of causesexternal to the eir--bryo.In other *oidr,
behavior is best regarded
as determinedby forces outsidethe particular individual.
tn'psycrrology,the hard determinist position has been arguedmost forcefuily by stinnJ.ie.g
.,1blD, although
f'reu-d'sbiological determinismis no less antagonisticthan Skinner,s to a notion of
freedom of choice.
The debatebetween advocatesof free will and advocatesof
determinism is of more
than academicinreresr.to.psychology. Some forms of p.y;i;;;rapy
assumethat clients
can chooseto changetheir actions.Fsychologistsofr#eipe.t
i"riiritt"v uuout t",nporu.y
Iapsesin volition amongcriminal defendantslPsychologiJts
stuJy attitudechange,social
influence processes,and sourcesof resistance-tocorifo.-ity
iressures. None of this
would be possibleunlessone were to assumethat under nor-ut,
everyday, .onJition.
people can make choices. on the other hand, determinists
*gu" that unconstrained
choice all but eliminaresthe predictablity of behavior. n"Jiiir,.'d;;.;;iii,;'i,
assumedaway, what business-do psychologistshave in
searchingroi regutaritie'sin
behavior?Fortunatel:r,psychologirishau" been able to settle
flr a position known as
determinism." This position follows the activity tnrory oi'"ausality
. - -,rft
first specified
by Thomas Reid (1863). The theory holds that .uu*tity iti
rru1nunbehavior is fundamentally different from causalityin physicarsystems(which
*. p.".u-"d to be completely deterministic)' specifically, iteid assertedthat rhe
notion of determinism was
incompatiblewith the universaltrumanexperienceof deliberation,
choice, and with all
systemsof morality. Moral judgments make senseonly if people
are tirought to ile
capableof making choicesfor which they can later be h;ld d
account.capriciousness
and unpredicrability are.avoided
-br, qtr" presumption that menral events, lit" p-rry.i."r
events, are characterizedby regularities
that sciencecan discover. Thus the soft determinism-position agreeswith indeterminism that mental events
need not have external
physical causes,but agreeswith hard determinism that
all behavior is causedby ,;;;thing----eitheran internal mental event or an externalphysical
event. Needlessto ,uy, uny
psychological theories that involve cognitive maniputation-oi-inro.-ation
must also
subscribeto a soft deterministpositionon the issueoi free will.
And this includesnearly
all psychological theories thai attempt ro account for human
fi;;;:
e;;;;fi;,
choice is the third feature of our approachto the creation
of new ventures.
A comprehensivep.sychological
portraitof new venturecreationwill ultimately have
to show how the individual's cognitive representations
of the world get translatedinto
action' To.accomplishthis purpose,it wili ultimately be necessary
to considergeneral
orienting dispositions(such as attitudes),motivationarpii*tpr"r (such
as subjective
Winter,199'l

expectedutility), and personalmotives (such as achievement

motivation). It should be
noted that choice for a psychologist is not always the
same as the rational decision
making inherent in economic.theory.Important psychological
models of social behavior,
such as exchangetheory (Kelley & Thibaut, tg1u, do aisume
that people,sactionsare
directed by a desire to maximize their own outcomes. yet,
there are significant exceptions, perhapsthe most familiar of which is the idea ttrut g.ouf
processescan obscurethe
facts and produce faulty decisions (Janis, rg72). A th;;G;'p'sychological
"pf.o*r, to
the study of choices involved in new venture creation must-incorporate
both the rational
and the irrational features of decision makine.
In the pages that follow, we describe h6w consideration
of person, process, and
choice can illuminate the study of businessfounding. In;Jsection,
we describeone
example in detail, and then briefly mention othersihat should
atso be considered. No
attempt is made to be.exhaustive;our objective is only to present
the possibilitiesol a
psychological approach to new venture creation.

THE PERSON,NOT THE PERSONALITY

- As noted above,psychology'sfocus on the personas the unit of analysisshould not
be construedas equivalent to iiearch for personblogicalvariables
that, regardlessof the
situation, produce behaviors that lead to tire creation of new ventures.
Ear-lyin psyctrotogy's history as an experimentalscience,woodworth (1938) described
the rela'tionship
between the environment and the person by noting thaf the environment
was the source
of stimuli impinging on the organiim, wtriitr then
f,roduc"o u *"aru.able response.This
stimulus-organism-response
(S-o-R) view constrastedwith Watsonian behaviorism,s
claim that the o contained nothing of theo^reticalimportance.
Most modern pt.h;i;gists subscribe to some version ol the S-o-R modei,
but all iecognize that onty ttre
stimulus and the responsecan be observed directly. Any and
all of ttt" *g"nir-i"
variables (the various o states)must be inferredfrom the reiationships
observedi"t*""n
classesof stimuli and classesof responsei.what this means,u-ong
other
things, is that
no particularo-explanationis any more "r:11_, thanany other.
Somepsychologistswill,
therefore' infer enduring personality variables from observed
relaiionships"uet*e"n
s.timuliand responses,whereasothei psychologistswill instead
infer cogniiive, attitudinal, or motivationalvariables.Having-learned-sometimesthe
hard wiy-ttre timits
of inferencein their graduatetraining, most psychologistsregard
with a healthy skepticism any claims that a particular S-R conneition haJbeen riediated
"""tu.iGy-L-fu
single-sortorganismicvariable.

Risk-taking Propensity
This skepticism is first directed at methodology, and that is precisely
the reasonthat
psychologists are wary of researchclaiming to iirow that
one personility variable or
anotheris characteristicof people who found new ventures.A specific
example illustratesthe point.
On the reasonable assumption that the creation of new ventures
involves risk,
students.of entrepreneurshipbegan to investigate whether founders
where higher-in
propensity toward risk than were people who did not start their
own businesses."Unforthe vast majority of this research(reviewedby Brockhaus, 19g0,
SnatefY'
and later by

Brockhaus
& Horwitz,19g6)hasemployed
,o*. u".iion or tneror""'*Jw"iil.i
(1964)ChoiceDilemmas
(coQ)
Questionnai.e asthemeasu."
oirirt-tit ingp.op";;itt.

The measurewas originally developedby Stoner(1961) in a master's

thesisat the MIT
28

ENTREPRENEURSHIP
THEORT
ond P|?ACTICE

school of Industrial Management,and having.beenappropriatedby psychologists,

the
measurehas now found-its way back into buiinesr ."."*.tr. rne
boe consiits or-tz
short vignettes in each of whictr a protagonistis attempting to decide
betieen u ,ur", uu,
dull, alternative and a m9r9 intereiting, but risky atternative.[n
much of the researchon
new venture creation' subjectshave read these vigneftes only
once, and have indicated
what probability of success(of the risky alternativi) they *outo need
to have in order ro
encouragethe protagonist to take the chance. The averageof the
required probabilities
of successis then interpreted as indicating the risk-takitr"gp.tf.nrity
of the subject.
-Following this tack, however, is very likely to invoiue ai least three fundamental
methodologicalproblems.First, the judgmentr ihut the subjects
are, in fact, directedto
ma\e fo1 a.notherperson (the protagonisi), are being inconLctiy interpreted'as
identical
'
the choices those same subjectJwould make foi themselves.Now
there are times
in psychologicalresearch,the dependentvariableis so heavily loaded
F?nt
with social
desirability-thatsubjectsare asked"whai most peoplewould do," in
the expectationthat
answerswill reveal the subjects'own tendencies.-Butsuch reiearch
typically contains
independent variables that have been manipulated by the .*p".i*"nt..,
and the only
claims made concem differencesbetweenexperimentalconditions,
not the degree to
which one self-selectedgroup of people (buiiness founderg,
as opposed to another
self-selectedgroup (managers),poisesiesthe tendencyrn queition.
The secondproblem is that in risk-takingpropensiiyresiarch, the
cDe is being put
to a use for which it was not designed.es emptoyedby Kogan and
wallaci (l96aiind
by legions of other.psychologisti, the CDQ was ttre vehi"cleto
measurechangesrn
expressedlevels of riskinessthat occurredas a consequence
of group discussion."Inthe
l-arse1society at the time, the peaceful civil rights demonstraionj
were occasionally
deterioratinginto group.violence.As part of pJychology's attempt
to understandthis
problem, Kogan and Wallach wonderedwhetheidinusloir'orresponsibility
amongmemF* :{ a smallgroup led the group to engagein hostile and agglessivebehaviorthat no
individual would have undertikenon his-oiher own. To "*uiTn"
the effectsof discussion, researchersinterestedin what was then called the "risky
shift" would first have
individualsrespondto the CDQ in private, then would havethe group
discusseachitem
t- ronsensus,and finally would have individualsrate
the items-again.The CDe never
htderwent the sort of reliability and validity testing that would 5e
required foi a real
"personality
measure," becausethe dependentvariable of interestwis the change
in
riskinessexpressedfrom before to after discussion.In short, the psychometric
propJrties
of the CDQ are unknown (although in the normal courseof evenis it was
discoveredthat
some of the items produced conservative,rather than risky, shifts).
To use such a
measureas the index of a relativelyenduringpersonalitytrait is a serious
methodoloeical
eror.
Third, recentreearchon what is now known asthe "choice shift" (reflecting
the fact
that on some items the actual shift was in the conservativedirection)
makesa very strong
theoretical case against using the cDe as a measureof risk-taking propensity.
s*",
evidence.ever.supportedthe notion that diffusion of responsiUifity
wai the .uu." of
changesin riskinessfrom beforeto after discussion.Indeed,a number
of studiesshowed
that face-to-face discussion was not necessary,provided t'hat participants
were shown
transcriptsof what otherpeoplehad said. Theie findings led investigaio.s
to concentrate
on the information that was normally exchangedduing a typical
discussionof each
"a
vignette.For eachof the twelve items, subjectsthink up u#"ty
of argumentsin favor
of the risky alternative,and a numberof argumentsagiinst that
samealternative.Each
argumentcan then be ratedfor persuasiveness,
and theie ratingscan be usedto calculate
the relative persuasivenglsof the argumentpools in favor of,"and
opposedto, the risky
alternative. Items for which the perzuasiu"nis of the favoraurepooi
was greaterturn"i
Winter.1991

29
----

out to be thoseon which therewas normally a risky shift. Items for which the opposing
pool was more persuasiveturned out to be those on which there was normally a conservativeshift. Moreover, Burnsteinand Vinokur (1977) showedthat whether an individual participant would shift in the risky or conservative direction dependedon the
relationship between that person's own argument pool and the group pool discovered
through discussionor someother exchangeof arguments.Thus, at the individual level,
it is the person'sinformation, not his or her personalitycharacteristics,that determines
the direction of shift. One needs no better reason than this to discard the CDQ as a
putative measureof a personality trait.

Locus of Control
Several other personological variables are frequently enumerated as part of the
"personal" characteristicsof the creator of a new venture. For example, in a recent
analysisof the entrepreneurialprocess,Bygrave (1989a)presentsan embellishmentof
Moore's (1986) model that includesneedfor achievement,internallocus of control, and
tolerancefor ambiguity, in addition to risk-taking propensity.Only two of thesevariables-locus of control and achievementmotivation-have received wide attention in
the entrepreneurshipliterature. In contrast to the caseof risk-taking propensity, both of
these variables have been assessedwith instrumentsdesignedto measureindividual
differences.
To investigateexpresseddesirefor control, many investigatorshave usedthe Rotter
(1966) lnternal-ExternalLocus of Control scale(e.g., Ahmed, 1985;Cromie & Johns,
1983;Timmons, 1978;Venkatapathy,1987).Doing so, however,is at leasta tactical
mistake.As Rotter (1990, p. 491) himselfhas recentlystated,
In studying locus of control, becausewe were dealing with a broad constructintended to study behavior in a variety of situations,we wanted to sample many
different situations without making the total score more dependenton one kind of
situation (such as school achievement)than on another(such as political involvement).
Given this objective, it is not surprising that factor analysesof the I-E scale have
routinely revealedmultiple factors, typically distinguishingbeliefs about personalcontrol from beliefs about political systemsor interpersonalrelationships(e.g., Collins,
1974;Levenson,1981).Moreover,asStrickland(1989,p.4) notes,elementsof Rotter's
"would demandthat reinforcementvalue and the intricaciesof the
sociallearningtheory
situation in which behavior is occurring be taken into account for the most precise
prediction." Thus the global scalemay not make valid predictionsin the specificsetting
of new venturecreation;a domain-limitedscalesuchas that proposedby Paulhus(1983)
would be a preferablealternative.In fairnessit should be said that the I-E scale has
successfullypredictedbehaviorin a variety of interpersonaland health-relatedsettings,
and appearsrelatedto perceivedcontrol, optimism, and physicalwell-being (seeStrick"Wall Street
land's 1989 review). On the other hand, past success,as they say on
Week," is no guaranteeof future performance.

Achievement Motivation
Of all the personologicalmeasurespresumedto be associatedwith the creationof
new ventures, need for achievementhas the longest history. Indeed, McClelland's
30

THEOI?V
ond PI?ACTICE
ENTREPRENEURSHIP

(1961)initial assertionthat needfor achievement(nAch)

is rhe psychologicalmoderator
betweenProtestantism^andeconomic growth.can tegriimar"iy'u" regardedas
having
originated the searchfor the "p"..onility characteistics
of the ,u.-..rrrurl"i;;;;.neur'" Remarkably,althoughthit questis now thought
quixotic, achievementmotivation remainsperhapsthe oniy.personologicalvariable"whor"
urro"lution with new venture creation appearsconvincing.
AchievementmotivaJionwas originaily defined in.Murray's (r93g)
systemof per_
sonality' In philosophicalterms,Munay's was.anidentity
trr"*y of personality,holding
"may.be
that personality
definedas the-governingorgan, o. iup'e.oroinateinstitution,
of
the body. As such,it is isolaredin the biain. N9irai"n,
n"p".Jonurity,, (Munay, r951,
p.267). consequently,aneedwasa force "in.the
u*in."gion;;(Murray, 193g,p. 123)
that organized perception' intellectual
activity, uno u.fion.t rn. specific need for
-_.rievement(nAch) was defined as
To accomplish somethingdifficult. To master, manipulate,
or organize physical
objects, human beings, or ideas. To do this as ."pioiv,
*o as in"depeno'e;irt;,
possible'To overcomeobstaclesand attain a high
ttunJu.o. ro excel one,s self. To
riv-aland surpassothers.To increaseself-regariby ;h.
;;;..tsful exerciseof talent
(Munay, 1938,p. 164).
Depsite its focus on the whole individual (Murray introduced
the term..personological"), Murray's theory retainedthe psychodynu.i"
r..g., ei.*oian) assumptionthat
unconsciousprocessesguide behavioi. For our purposeJ,
this assumptionleads to the
methodologicalexpectationthat the assessment
oi ne^"dsmust involve projective,as well
as objective, tests. His projective Thematic^Apperception
teit (TAT) quickly'became
secondonly to the Rorschachin breadtnorapptlcation,
uJ*as the originuirn.uiu..
used in the assessment
of achievementmotivation t..g., Ly McClelland, Atkinson,
Clark, & Lowell, 1953).
. .Some 25 years later, Fineman (1977) would be able to describe22 measuresof
achievementmotivation, only a few of which were projective.
More recently, Johnson
('^90) reviewed eight measuresthat
have been invotvea in examiningttr",liuiio;rhlp
t''aveen achievementneedsand new venturecreation.Two
of these-the TAT and the
Miner SentenceCompletion Scale(MSCS Form T; Miner,
lgglFare projective mea_
sures'Two are subscalesof larger personalityinventories-the
EdwardspersonalpreferenceSchedule(EPPS;Edwards, i959) andthe personality
n"."u..t Form_E(pRF_E;
Jackson, 1974). The remainingfour-the Lynn Achievement
Motivation questionnaire
ILAMQ; L1nn, 1969),the MelirabianAchievementScale(MAS;Mehrabian, l96g), the
Sentencecompletion.fT, rscr' Mukjerhee, 196g), and the
work and Family orientation lnventory (woFo; spence & i{elmreicrt, iqs:Fui.
specific to achievemenr
motivation, aqd_freouSltrvwepjesigned to overcomewhat
werl regardedas probrems
in the original TAT measure.aFineian's (1977) review
examineo7g casesin which
3' Given the tendency to consider achievementmotivation
as a personologicalvariable independentof

i'npo'tuni.r"'"ffi'Mu,,uv',

theory
were
press
(pluralandsingular
:J,T;11"1':lT:1i::::;'j::'j,Tj3r*l1T
:qi:l,l
arethesameform).These
were
attributes
or p-p.ni.r ot.-i.-"iiui..,, "1;Hii;:i
acted to impede or facilitate the goal-directed behavior of
the individual. lVloreover, Murray distinguished
(theobjectsas thevreallvare) ftombetapress(theobjects
as theyarep.i..iu"J'ry ir,"
i!frn{:;i:
4' The most pervasive problem was the failure of rAT-like
measuresto predict achievement behavior
amongfemales' Given thedated, highly sex-rolestereotypediature
of the pictluresactuallyusedin the TAT,
this is understandable.Indeed, futuie users of the original
ref pi.t."r"""gi,
r" * required by editorial
boardsto insist on a gender-basedlimit for generalizaiion
ot..r"'u..tr inu"r"i"g tt" original TAT pictures.
Wnter.'t99,|

..,1

correlationsamong measureshad been computed,and in only 28Voof theseinstances

were the correlationspositive and significani. Johnson's(t99b) review, specific
to the
entrepreneurship
literature,addedno studiesin which there had been crois-scalecomparisons,but did find a relationshipbetweenachievementmotivation, however
measured, and entrepreneurship,however defined, in 20 of 23 studies. The reasonable
conclusionsJohnsondraws from this are that thorough specification of the targef g.oup,
careful operationalization of achievement motivation, ind detailed descripti"on""f
ti"
environmental context are neededbefore future researchcan make substantialprogress.
From a psychologicalperspective,of course, "careful operationalization"of achievement motivation would necessarilyinclude attentionto lssues of scale reliability
and
validity-psychometric niceties all too often overlooked in the past literature
on n"*
venture creation. Notwith,standingthe various conceptualand methodological issuesyet
to be resolved (Frey, 1984), achievementmotivation remainsthe perso-nologist's
blst
candidate in the attempt to account for new venture creation.

Method and Context

Many of the lessons inherent in researchon the person variables associatedwith
entrepreneurship
havebeennotedbefore(e.g., Gartner,tqgg; Low & MacMillan, lggg;
Sexton & Bowman, 1985;vanderwerf & Brush, lggg), but threebear repeatinghere.
First, don't send a scale to do an inventory'sjob. If your goal is to ideniify th"erelationship between a particular personological variable ind niw venture creation, use
a
psychometricallyrespectableinstrumentdesignedfor "trait" assessment
ratherthan for
some other researchpurpose. Second, don't confusea single score with the answer.
Adhere to the principle of multiple operationism(campbJll & Fiske, 1959), which
demands that conceptual variables be measuredin more than one way. Such research
tacticsare essentialnot only to assessthe relativeperformanceof the multiple measures,
but also to discover whetherthe underlying variible is unidimensionaloi multidimen$oryI. Third, don't ignore the context. Is the instrumentitself domain-specific(like the
Paulhus, 1983, Spheresof Control scale'sthree subscales)or domain-general(iike the
original Rotter, I-E Scale)?A mismatchbetweenscaleand assessment
environmentwill
produceconfusion.Even if the scaleand the domain match, the assessment
outcomeis
likely to be compromised if the demand characteristicsof the setting (Orne, 1962) and
pressurestoward socially desirable responding are ignored.s For both methodological
and conceptualreasons,then, psychology'sview of new venturecreation"on"entLt",
on the person in his or her situationalcontext.

THE PROCESSOF SOCIAL COGNITION

Not even the most resolute advocatefor enduring "personality differences between
entrepreneursand nonentrepreneurs" would argue that a complete map of the human
genomewill reveal a specific genethat can separatenew venture founderi from everyone
else. Variations in entrepreneurial activity within the individual over time, betiveen
industries, and across political boundaries are too obvious for a purely genetic expla5. Social psychologists routinely assumethat researchparticipants are actively anempting
to discover the
true purposesof the study, and the demand characteristics are the sum total ofthe "u". uiuilubl" (whether
or not they might lead the subject in the correct direction). Moreover, researchersneed to be aware
of the
social. desirability implications of questions they ask. Finatly, any interchange between
researcher and
participant should avoid evaluation apprehension, the subject's tendency to resfond in ..typical"
a
fashion
to avoid appearing "different" (Rosenberg, 1965).

ENTREPRENEURSHIP
THEOTT/
ond p|IACT|CE

nation to be prausibre.Environment
is_crucial. consequentry,the psychorogical
per_
spectiveon new venture creation should
""".i4* rr.iutiiui'"*,"-ar
environment
becomesrepresentedin experience.Because
the creationof-a Lusinessventureis,
fundamentally' a social.activity,we shall concentrate
on processesof social cognition. These
include aspectsof attention,.rnarrtoty,
"ategorization,and-inference(Fiske
& Tayror,
l99l)' but the approachcan be illusirated
riith two r"r."-i^"o"tent areas-hypothesis
testing and attributions for successund
fuilur".

Cognitive Heuristics
In the processleading to creationol-1.new
venture, ..opportunityrecognition,,is
often described and treatJd u, u f..y lnlredrent:
Entrepreneurssee ways to put resources
and information together in new combina_
tions. They not.onry iee.thl systemas.it
is, u", "r-ii'n'rlit be. They have a
knack
for looking at_the usuar and,."i'g
tr,"il.d,
;;;:'ordinary
and
seeing
the
extraordinary'consequently,they.in
,pot opportunitiesthat turn the commonplace
into the unique and unexpelted(Mitton,
19g9, p. l2).
Environmentalcircumstanc.gs
do not paradepast like so
some of
whosebadgessay "inrerestingprospecr,;'*i".Lur;;;;;y many conventioneers,
..dud.,,Rather,
oppor_
tunityrecognition,
likebeaut-yj

is in trre

ao"Jlil;
processthe incominginformaiion?To t;-;*L",i.i;d;i..HJ*
whai internarrr""o*J. rs rr compared?;5i.""
No researchon new venturecreatio.n.directly
address;;;il;;;,
our rt. socialcognition
Iiteraturesuggests
somepossibilities.
For example,considerthequestion,"what
is
X will
fail in its first yearof operation?"soptristicatea thelikelihoodthatRestaurant
"";p;;.lilip
."r"*hers recosnize
thatthis is a controversial
question,u'uiit" definitionali.;;tili;;k"
i;;; *""rtlt"ry
to beloston "ordinaryfolki" outsidethe
academi.
so insteadof answering
th'questionwith queitionsald quatiRcaiions, ";;;;;6.
th9s9peoplea.elitety to givea numerical
e'-,nate. But because
peopleare nor goodintuiti"; .;;iJ;;;ns,
thisjudgmentunder
uncertaintyis apt to be influencedby"at least
three-iiiiiir'i'n"uristics-availabitity,
representativeness,
andanch_oring
(Kahneman,
slovic, & Tversky,1gg2;Kahneman&
Tversky, 1973;Tversky & Kahiei""", f qzi,
e p"rron *nolur, read aboutanother
restaurant's
closingin themorningpaperwlr
a'trifi;.;;ri-"te of failuresrhanwill
live
a personwho has not seensuchl^storyin
u rongiiti.-i,rt.'uuuilubility heuristic).A
personfor whomRestaurant
X is typicafof successfur
"rtiri.n.ents will makea lower
guessaboutfailurethanwill u p"..- for
whomtnenestauranlx ,"r"*ules failures(the
representativeness
heuristic)-.
Flnally, a perceiver*rro mo*s-itru, ,n ""
localrestaurants
havefailedwill makea smallerestimate
thana perceiverwho
has
*
been
told that 10,000
restaurants
havefa'ed nationaty (the anchoringheuristict.
why shouldresearchers
inteieiteoin newventurecreationcareabout
suchcognitive
heuristics?For one thing, they prouio" a social
"ogniti;-ultLatiue
explanation
for
phenomena
frequentry_int"rp."i"a
in ott., theoreticait".-r. er'one example,
scherer,
Adams,carley, and wiebe (19g9).tro*"d-that
prese;;; "r"" enrepreneurial
parent
wasassociated
with increasedexpecrancy
or "nt"rinfu; .;;;;*uriar
career.Scherer
et al' madea strons.case
that.thep*"nt provided-a.ot"r6o.t whose
activitiesand
behaviorr".. ".ul"utedthrough" rlr.r'"rrodering.onriJ"nt
*ith
Bandura,s
(1977)
sociallearningtheory.But the-child.enoient
epreneurialparentshavemorethana role
Winter.199,t
33

model, they also have information that is unavailableto children whoseparentsdid not
start or purchasea firm. The way to tell the two explanationsapart, of course, is to
examinethe contributionto child's entrepreneurialinterestof parent'sventuresuccess.
Unfortunately, the study was only able to measurethe child's perception of parent
success.So the social cognition alternativecannotbe ruled out. The larger conceptual
point is that the socialcognition processesare no more-and ns ls5s-2n inferencefrom
the data than is the notion of vicariouslearningfrom an effectiverole model. Each is an
O-variablethat accountsfor the observedrelationshipbetweenthe S of entrepreneurial
parentsand the R of child's expectancyof an entrepreneurialcareer.o

Success,Failure, and Persistence

Cognitive heuristicsguidejudgmentsunderuncertainty.When outcomesare known,
other processesof social cognition enter the picture. Before proceeding,it is important
"outcome." In a
for us to specify more carefully what we do and do not mean by an
Bygrave
recentapplicationof chaostheory and catastrophetheory to entrepreneurship,
change,
and
this
view of
(1989b) notes that organizationfounding is a discontinuous
organizationcreationas the singularevent to be explainedis inherentin other accounts
thattake quite disparatetheoreticalpositions(e.g., Aldrich, 1990;Gartner,1988).We
agreethat the actual founding of an organizationis a discontinuouschange,but do not
"event" to be explained.Nor is it likely that the foundersof
believe that it is the only
new businessorganizationswould agreethat they have only done one thing. Rather,
founders would probably argue that they have done many things in order to get to the
final one.' Thus we believethat the discontinuouscreationof a new ventureis preceded
by a seriesof prior discontinuousevents, each of which can be considereda separate
"outcome." Such outcomes might include identifying a market niche, designing a
product or serviceto fill an identified need, and establishingthe company. Note that
"outcomes"; they are not intendedto exhaustthe possibiltheseare only a few of the
ities. Moreover, it is not necessarythat the researcherbe able to specify all of the
outcomesin advance.Social psychologistswould be as comfortablewith the founder's
own list of outcomesas they are with people's natural cognitive categories(Rosch,
1978) or people's chunking of behavioral events into discrete sequences(Newtson,
1976).No matterhow the sequencefrom initial idea to new companyis segmented,the
social cognition approacharguesthat the explanationspotentialfoundersoffer for prior
segmentswill affect the likelihood of the final discontinuouschange.
Of particular interest are the attibutions potential foundersform to explain sucwere first described
activity. Attribution processes
cessesand failuresin business-related
performancewere
of
task
(1958),
elements
that
the
essential
who noted
by Heider
When
action
is intentional, its
luck.
an
and
difficulty,
ability, intention, effort, task
internal
elements(ability
of
the
two
the
combination
on
successfulperformancedepends
(task
of thesepairs,
luck).
In
each
difficulty
and
factors
and effort) with the two external
6. The same is true for any account that depends on the assessmentby an individual, or a group of
individuals, of the probability of an uncertainoutcome. Thus, for example, when population ecologists
"potential founders may be frightened by relatively high or increasing death rates" (Aldrich,
argue that
1990, p.9) they are making an inference about a psychological moderator (fear) that psychologists would
argue follows in time the gathering of information. Parsimony alone would suggestthat purely informational
moderators such as cognitive heuristics should at least be ruled out before higher-order moderators are
invoked.
7. Whether we are correct in this supposition is an empirical question. From a psychological perspective,
of course, what really matters is the definition provided by the founders, themselves, rather than by
entrepreneurshiptheorists

34

THEORY
ONd PMCTICE
ENTREPRENEURSHIP

!
the first elementis stable(a person'sability doesnot changedramatically
from one time
to the next, and the difficulty of a given iask is a constait relardless
or *ni.t p".ron
attemptsit). The secondelementin eachpair is variable persJn's
effort varies,"'Jin.
1a
capriciousness
of luck is notorious).
Building on thes_e
distinctions, weiner, Russell, & Lerman (r97g) developed
an
attributional model of persistencein achievementtasks, and the model
can be adaptedto
the founding of an organization.In a technologicalstart-up,for
example,before there
can be a new organization,the founder-to-beriust at minimum
developano tesi pioiotyp:s, conduct appropriatemarket research,createthe standard
financial p-p"ii-r,
and construct a businessplan suitable for securingventure capital.
Rarely is ealtr or
theseactivities completedto the founder's satisfactlionon the first pass.
Consequently,
such a founder will typically havg multiple.failures to explain, andwill
have to persist
in the face of thosefailures in order to reachthe ultimateoui".iiu..
In weiner, Russell,
- 'd Lerman's terms, the potentialcausesof eachof the failurescould be lack of ability,
lack of effort, insurmountabledifficulty of the task, bad luck, or,".t,
*r,* id;;;*,
as the intentional barriers erectedby people who might not want
to see the venture
succeeo.
. 3" .u*gus potential causescan be describedby three theoretical dimensions:
stability (stableor variable), locus of causality(internalor "*,.*uiidunJ-i",."ri"""ri,y
(whetheror not productionof the effect involves the founder's
intentions,the intentions
of other peoplein a position to influencethe outcome,or somecombination
of the two) .
Thesethree dimensionsare not entirely independent,becauseintentionality
on the part
of the founder would be necessaryfor thereio be an attributionto the
variable-internal
"effort.
"
causeof
Peoplesimply do not exertthemselvesby accident.The model *ju.,
that the positionsof the variouselementson thesethreedimensionsproduce
one of two
kinds of internal effects. By itself, the presumedcause'slocation
on the staUitityJlmensiondeterminesexpectancyshifts. If the failure is attributedto bad luck (external,
variable), or to insufficient internal motivation (internal, variable),
the perceiver can
reassurehimself or herselfthat in the future things will be different. In contiast,
the locus
and intentionality dimensionscombine to produce the affective reactions
oi pride or
shame'Specifically,slram9resultsonly if the outcomeis attributedto an intentional,
and
internal, failing' Turning back to the positive, observable,behaviorof persistencei,
the
-.nders-to-be can be expectedto persistafter failure only if they believethat their stable
capabilitiesare equal to the task, that the variable elemlnts of the equation(their
own
effort and the contributionsofothers) are subjectto their intentionalcontrol,
and that the
emotionalconsequences
of repeatedfailed attemptsare lessnegativethan the emotional
consequences
of declining to try.
This attributionalmodel was originally derived as an explanationfor
achievement
motivation, and it has been found to predict achievementbehaviorin a wide
varieiy of
settings(much of this researchis reviewedin Weiner, 1986). Moreover,
the principles
inherent in the model have been generalizedbeyond contemporaryAmerican
culture to
societieswith dramaticallydifferent economic_indsocial .yit..., such
as the people's
Republic of china (Stipek, weiner, & Li, l9g9). Thus the model can
easily be tians_
plantedto the study of new venturecreation. A first effort in this regard
has recently been
reportedby Gartner, Gatewood,and Shaver(1991). Briefly, theJeinvestigators
asked
pre-ventureclients of a Small BusinessDevelopmentCenteito explain
wtryitrey wanted
to enterbusiness. In addition, eachparticipantwas askeda compaiable. .
why' ' question
abouttwo kinds of purchases-the last automobilepurchased,and the lastpiece
orsports
the similarity in the terms, artributionallocus of causality rs conceptually
I .*:pi,:
distinct from the
individual difference variable of "internal-externallocus of control."

Winter.1991

or. fitness equipment purchased.The participants'

free-responseanswers were then
subjectedto an attribrrtionalcoding thaicategorized
each uni*". accordingto whether
it was internal/external,stable/uu.[b1., and ieflecteo
u "uur" or a reason(a version of
intentionality).Analysis of the resultsshowed,
for example, that luvo of the business
choiceswere explainedin internal terms, whereas
r.*", itun'35vo ofthe choicesin the
other two categorieswere explainedin internal
terms. aritrougn more researchin this
areaclearly needsto be done, thesepreliminary
findingt inoilur" that the attributional
model can profitabry be appriedto the study of n"*
u"lnt* .."ution.

Representationsof External Circumstances

cognitive heuristicsand attributionalprinciplesarepart
of the psychologicalaccount
of ways in which the externalenvironmentbecomes
in the mind of a person
who might become the founder of a new venture.ryPreseil
For this reasonthey representthe
internal process presumedto mediate between
the stimuli (suctr as ..opportunities")
presentedby the externalenvironmentand lhe
responsesfruch ur ..organizationfounding") that are critical dependentvariablesin the
study of new venturecreation. variations in the processof social cognition can herp.
"*pruin *rry not ail peopre high in
achievement motivation (or any othe. personotogicai
variable'reliably associatedwith
new venture creation).actuallyfound organizations.
Additionally, theories or ,*i"r
cognition must be consideredc-ompetition-foruny
otrr". .^pru*tory principles that find
their
through the headsof organization founderr. o"
.way
ttr"i. face they are no more
plausible, or less plausible,than oiher o-variables
such as sociattearning,role expectations, or prior organizationdeaths.The challeng"
roi rutu." ,"r"ar"t, on new venture
creationis to find convincingways to distinguish"on"
ru"r, "*planation from the others.
Unfortunately,the experimentaliesigns that are a staple
of psychologicalresearchmay
not always be appropriate in the study of new venture
creation.
when facing the task.of disentangringcompeting
o-variables, psychologistsdo
experimentsthat occasionallystandthJorilinal p.opolition
on it, t"iJl r..-";;*;,
rather than searchingfor personological difierenc""i";;;;-,-i"uy
or risk-taking propensity, shaver, williams, and Scott trqqol useda bogus
test oi.nLp..neurial abilities to
convince subjectsthat they either were, or were not,-lik"ly
candidatesfor the ro*oing
of new ventures. overall results showed several
effects for this belief. people who
thought they had entrepreneurialcharacteristics"*p."r*o!.*ter
creativity and achievement motivation' Moreover' on items dealing *ittr
uurln"rr .isk (but not on items
dealing-withpersonalrisk), maleswho believeJthey
*".".ni."p.eneurial selectedmore
risky alternativeson some cDe items and on "o-p*uure
i[ms designedby scott
(1e90).
Thesestudies.uI: ,*g important poinrs. At the
empiricarlever, they show that a
social cognition variable-beliei in oneis entrepreneurialiendencies-affects
responses
that may be related to successin new venturecreation.
At the conceptuallevel, they
bolster our concernabout the."personality characteristics';
apfroach. when scoreson
measuresthat have beenusedin personologicalresearch
canii manipulatedby instructions in.a brief experimentalsetiing, one"must wonder just
how ..enduring,, are the
personality characteristicsthesemeasurespurport-to
identify? we recognize thatexperimental designs, which uue common in psyinological
re"search,may not arways be
appropriate in the study of new venture^cieation]
on the otte. tano, ,o-"
{uuriexperimentaldesigns(Campbell& Stanley, 1966;
Cook a-CarnpUefl, l91g)can serve
as excellent substitutes. jhe very reastj we would
echo receni calrs (Gartner, 19g9;
lt
Low & MacMillan, 1988)
for proqpectiveresearchon organi"aiion founding.
36

ENTREPRENEURSHIP
THEORY
ond pMCT|CE

TIIE EXERCISE OF CHOICE

At the risk of belaboring the
obvious, new venturesare
not createdby role models,
support networks, or the
itate of the population ".o..ying
capacity. New venrures
emerge' and take
$e form they do, uecauieiriin" laiu"rit" "t oi"". made
people'Notsurprisingry,
by individual
rhe,rr"a'airii"e"pr,i"fr""t;;';i".p.ychorogicar

newventurecreationis its focus

approach
to

on thEi--"-oiut.*li,J..o.r,o of
perspective
choice,Fromthe
of the potentialfounOer,two questions
,,Can
"Do
u*..11i"uf,
ence?"and
I makea differ_
I wantto?': The
secondrequiresconsideratio" ilrior tt"r" in;r*
contror,
o"rl"i".o
whereas
the
"a;;r;;"tional processes.
-,.erceived Control
In Mitton's q.9s2) view, "Entrepreneurs
prefer to take and hold unmistakable
command"(p. l3). They know
rt.y'.rn
make
a differeie, and they berieve
personaty,can exerr.o,nqgr
they,
ou.. pJopt. u"o ""*tr.^iioi'i"u.n
entrepreneur,
the mosr,.compreat,,
however,berievesrdi;; o1
she.un .on,.ll lverything.perceived
trol-unlike the generaliz"o
con_
.*p".tuniy ro, rnt.-;iiffi
Jf .ont.or, or the needfor
tn' rvpe

ffilfiiifffl::"

e'L!r'""1"'
pattern
(Friedman
& Rosenman,
le74F-is

Much of the recent psychological

writing on issuesof contror
concentratedon the behaviorat
among adults has
efficts of losiig ioir"i"a.""g
terialinctudespsyclrolog,"ur
orher things, this ma_

i.*-t^u-*;,i:"_"d";t;il;ni;l.uno
on intrinsicmotivation'rtyttotogi.uireactance
tr," effecrsof control
i, ir,. .notiuutional
existingfreedomsarerest;cteo
statearousedwhen
oi ttrieate",:d_(B:.ilr'iiio, g*tm
what makesir interesting
& Brehm,
i. ;il;;';;"
is produceduy thedemandrhat,,you lggl).
do somethins
must,,
vou *ouri tuu".to..n';";"'";;;;;#:The
freedomto rfioose,^n".lg_"
key issueis rossof
id;ffiq::
something
distastefur.
controlpersistsover time, learned
wheretherossof
_:
help'lessnessmay ue-tt"-."rutt (seligman, 1975).
Ratherrhancontinuing figh;;
;; ;;;:';" simprvsir";6:lccording
' 'd version
1o.
to the reformu_
of rearn;d
h"fit.;,;.ia9o,
,i,J a?r",".iJ"s psycrrorogical
g*atest when fa'ures are
effectsare
attributedto i1i;-;i,;;il;i,.i"s,
generarize
and are expecredro
to othersituationsreu*.o"n,
Setigman,-a1.iro"r", lgTg).
lessness
is oftena consequence
wtrereterp_
of inaccurate
at;ibutionsro-thJself,intrinsic
canbereducedbv correctattributions
motivation
ol fontror,o .*r.,nuirorles (Deci
specifically'"utn rewardsro..u"..rrruiturt
& Ryan,r9g0).
on intrinsicmotivationuno r"rra.[..]nur.n, p".ro.rnu".i .r" t""e debilitatingeffects
ir trrai-reeai;i ,, seenas controring,
ratherthancompe"i::.{il;ti;;;i}
Ryan,
tt*i. ilil
risk of oversimplifying
eachof theseperspectives,
theaiswerto tn. qu"rtion'.iCu"
irnu*e
beaffirmative-onrv
a difference?,,will
if thepe;;;;;;;;r;".,
initial successthai can-beaftriilJ'i;';;ry, thechoicet* ". r,"r. to make,b) hassome
permitting(c) intrinsicinterest
projectto bemaintan"a'onlt
in the
ufu* iiir',rr. way in whicfrthe
potentialfounderrhinks
aboutreality,not the externar
..irity ru.tr, ,nu,determines
the ourcome.
Outcomes and Expectations
Beingabreto makea difference
is not the sameas wantingto do
of new venturesgive a variety
so. The founders
of ."ur*i'*f,." urf,J*fi,'ffi
estaUtished
nesses.Many of thesehave
their busi_
i.""nrr/!.""
;;;;o"r"rlli?r88),
and incrude(in
Winter.1991

descendingorder) desirefor autonomy,interestin personalachievement,dissatisfaction

with currentjob, desireto make money, and unhappinessin currentcareer.In both the
psychologicalliteratureand the organizationalliterature,suchmotivationshavetypically
been describedin terms of some form of expectancytheory (e.g., Atkinson,'1964;
Feather,1982;Fishbein& Ajzen, 1975;Vroom, 1964).Thesetheoriessharea common
form. Each predictsthat somemotivationaloutcomewill be determinedby the summed
productsof individual evaluativeelementsand individual subjectiveprobabilitiesthat
the associatedevaluativeelementswill, in fact, be achievedby the aition being considered.
There are, however, two difficulties associatedwith applying expectancytheory to
new venturecreation.First, there is the questionof how particulareiements-many of
which are actually negativein the organizationalcontext-should be scaled.For example, take "job dissatisfaction" from Cromie's (1988) review of reasonsfor startins a
new business.How might such an evaluative element be turned into the action of
creatinga new venture?Specifically,shouldit be countedas a negative(on the grounds,
for example,that it representsa failure of the link betweenperformanceand ourcomes)?
Or should it be counted as a positive (on the groundsthai it acts as a stimulus to try
somethingelse)?If it is the latter, what reasondoesthe individual have to believe that
failure of a performance-outcome
link in one contextmeansthat therewill be successof
the samelink in anothercontext?
Portions of psychologicalexchangetheory (Thibaut & Kelley, 1959) suggestan
alternativeway to think of things like dissatisfactionwith one's currentjob. Beginning
-in
with the assumptionthat individuals seek to maximize their own outcomes any
relationship,Thibaut and Kelley identify two standardsagainstwhich such outcomes
should be judged. The first, called simply the comparisonlevel (CL) is the averageof
pastoutcomesfrom similar circumstances.To the extentthat one's presentjob is below
the averageset by one's past experience,job dissatisfactionwill be the result. The
secondstandard,called the comparisonlevel for alternatives(CLu,,)is the bestcurrently
availablealternativeto the presentcircumstances.A personwhosecurrentoccupation;l
outcomesexceedboth CL and CLur,will be content,one whoseoutcomesare below CL,
but above cl-u,,, will be unhappy, but dependenton the current job. The difference
betweenpeople who considerjob dissatisfactionas a fact of life, and those who use it
as a reasonto go out on their own may be as simple as whether "creating my own
business" is one of the viable alternativesconsidered.
The seconddifficulty with applyingexchangetheoryto new venturecreationis more
fundamental.To see the problem, assumethat all elementscan be scaled, and that
despitethe uncertaintiesinherent in new venturecreation, the subjectiveprobabilities
can also be specified. Expectancyformulationsthen predict the resulting choice. But
they do so by treatinga highly desirable,but low probability outcomeas equivalentto
a much less desirable,but highly probable outcome. In a recent discussionof riskv
choice, however, Lopes (1987) makesa persuasivecaseagainstpreciselythis assumption.
Traditional study of risky choice in experimentalpsychologyhas presentedsubjects
with rrva-alternative"gambles," that frequently take the form "would you preie. a
1007ochanceof winning $3,000, or an Sovochanceof winning $4,000?" Although the
second choice has a higher expectedutility ($3,200;, most subjectschoose the first
choice, suggestingthat people are "risk-averse" (Kahneman& Tversky, 1979). such
findings are exceedinglydifficult to generalizeto the creationofa new venture,because
the real world rarely presentsjust two choices.In a program of researchdesignedto
overcomethis limitation, Lopes has presentedsubjectswith six alternative"lotteries"
with approximatelyequivalentexpectedvalues. After the participant chooseswhich
38

ENTREPRENEURSHIP
THEORT
ond PMCTICE

lotteryto play, a randomdeviceindicates ..winnings.,,

the
One of the loftenes
riskless,arwaysproducingrorn"puyoii,
*hereas,h;';'rh*ile conrainthepossib.ity is
azero payoff' The lotterietut iho*n
of
to^subjects
u. pi.tu..r, with dollaramounts
winningson the ordinateuna nu,nu".. ",i'"r."1:"ut#iluur"
of
or
for
dolraramounr
shownon the abscissa.
In additionio ,r,".ri.tt"., rru.iy,-in"re each
"peaked"
is a ..shortshot,,, a
distribution,u .".tunguiu.Oi.r.tUutio;;;'ffi;j"t
aistrtUution,
shot" which hasmostly,".o oiiotu-payoff
andu ;;long
our.o-o.-iilJ'p."f"."n.es of risk_averse
subjects
follow thisordlr in Oescenlirig
fashion.
Fromanalvsilgl ugtrrtrt. .*pi.*"i
p.eferences
andfree-response
expranations
choices,Lopei (1987)h;;;;.r;"p;it*o-ru"to.
for
th;t";;i.ky
choice.
is a personalpreference
tor r.cuity uolu, potential.Mathematically,Thefirst facror
securityseekers
weigh the worst outcomesmore ireavily,
;h;;;;
seekers
o"*"i",
weigh the best
outcomes
moreheavily'In a departure
from
tl" heseweightsincludeuotrrir,unger'in traditionui"*p.fiunc.ytheory.Lopesargues
tt. .rii.""ipi"iiuilities andchanges
vartlesof the ourcomes
in the
to whichthiie probabiri;;;;';";i"'.,r.6.
The secondfacroris
aspirationlevel' and is definedbt
6; iituation- rn. r"iii"g providesinformarion
what might be a reasonabre
on
expect"til"; ,t. ,|".#; u"rr.rn"uriu"
beingconsidered
couchedin a conte-xt
is
of other.nti..r uuuilable;'anJl".g.,
,rr","gic goars
tacticsemployed'Preference
r- ,".uriiy versuspotentialis considered canalterthe
a personological
variable'whereasaspirationr.u"r
ir rii'.rational;
the rinur.i.r.y choiceis thoughtio
determined
be
by the interactionu"l*""r.in. twoonce again,behaviorrelatei'to new
venturecreationis producedby the
interactionu.r*""nloron unoenvironment.
Expectancy and Uncertaintv
It maybe no accident
theorieshavebeenheavilyappried
within the
organization
3u,,.i!,:.":cy
riterature
(e.g.,
Loike & Latham,l9g0),;;t iess
u.oaolyusedin rhe
Iiteratureon new venturecreation.
The arrayof possibieet.*"nt. that
couldbe valued
is morelikely to bespecifiable
in anffiiratronri "";;;;irh; ir is in
an
entrepreneuriar
venture'After all' new venturecreatio'-n
is nothingir not innovation,takingthe
seenwith the foreseeable.
unforeMoreover,even if ttie elemeni,"ouro
be specified,their
valu's might not be.,tloseex.pecled
!r-rh.."r"u..t".r- nnoiinauy, comparedto the
reli'e certaintvof theorganizational
climate,theentreprenzurial
climateprovidesfew
cluesto the probabilitye#maier iir"i
ririrro ue attactre'J,"*"t individual
element.In the examination
"r .n"i".,'", wet as in the ,iuov or process, evaruative
the psycho_
logicalperspective
incorporates
bothpersonalandsituationalvariables.
CONCLUSIONS
The studyof new v:nqrr: creationbegan
with somereasonable
assumptions
thepsychologicar
about
characteristics
or "*t."p."neurs.,, Throughtheyears,
more
and
of thesepersonolosical
more
characte.irti"r"r,ui.beendiscarJ"f,^j.u""ted,
or
at
the
very
u"'n'"u'u."al"ii".ru"rv.

ir," i"r,irii^ been

atendencv
.,?i,T;"llxlt;"jlx
to
u
m
s
tan
p,ortanr
c
e
are
i
m
;,o"iurn"t*o',i.3llffi;,Ifiij JH#[T:|#,!;:* : _:irc
1
important;
finance
isimportanti;;;;;;;.

asency
assisrance
,,lH?:XXlllTilT:'l"tj;
thesewill, alone, createa new
ventu.". Fo. that we needa person,
in whosemind all of
thepossibilitiescome together,
who believesthat innovationis possible,
and who hasthe
motivationto persistuntil thejob
Jd*;.
i.rron, process,and choice:for
thesewe need
a truly psychologicarperspeciiv.
on n"*l"nture creation.
Wnter,1991
39

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i*ii,il.in.l"r";J]?lti;
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te6e. pp.

Kelly G. Shaveris professor psychology

of
at the Collegeof William
& Mury.
LindaR' scott is a student
at T. c. wilriamsSchoor
of Law, universityof Richmond.
thank
Elizabeth
J.
J'
Gatewoodano
v4rewuo(l
..^_,T":ujlrors
andLanny
L
version
Herronfor theirhelpfurcomments
of this paper.
on an earlier

\Mnter,199t
45