Entrepreneurship: Learned or inherited?

Amir Amini

Researchers and policymakers have long recognized the impact of entrepreneurship on the economic prosperity and development of countries. To paraphrase William Baumol, the eminent American economist, entrepreneurs are the usual suspects for both slowdowns and great leaps in economic growth of nations.

Given the positive consequences in both economic development and social change, entrepreneurship is a key variable for developed and emerging economies. Thus, it is not surprising that a deeper understanding of the drivers of entrepreneurship is a significant stream of research.

Among the most interesting questions in this field is why individuals in some societies engage in entrepreneurial activities, while in other countries people are not willing to initiate new ventures.

To answer this question, we should notice that the establishment of new ventures does not necessarily start with a product or service. Rather, it starts with an opportunity.

Perception dictates that a person’s inclination toward discovering such opportunities are what determines  entrepreneurial activities. In simple words, nature matters when we are attempting to understand human behavior.

Proponents of this argument assert that the discovery of entrepreneurial opportunities requires proper capabilities on the part of the entrepreneur, not only to identify opportunities to develop and evaluate them. According to this perspective, entrepreneurial self-efficacy incorporates a set of micro-level characteristics, such as risk-taking, ambition and optimism. It is clear that the level of such personal traits varies across individuals.

On the flip side, another school of thought posits that an individual’s environment influences the process of knowledge-gathering, preferences for different types of learning, information processing, and further decision making. Accordingly, there are political, economic and social factors that may explain the differential rates of entrepreneurial activities, known as institutional elements. Institutional factors are the macro-level processes that shape individual behavior and signify structures that develop productive, value-generating entrepreneurial cognition.

As one of the most crucial processes through which entrepreneurship is affected by institutions, they define incentives and constraints and lead individuals to invest in certain assets, acquire specific capabilities and cooperate. Simply put, this is a belief that upbringing or schooling facilitates or hinders entrepreneurial behavior.

Although no one can ignore the positive contributions of each view to the field of entrepreneurship study, a new perspective identifies an interplay between individual, micro-level characteristics and national, macro-level institutions.

Consistent with the new perspective, the opportunity has a dynamic nature. In this vein, individuals may identify opportunities based on the level of their alertness. However, exploitation of the discovered opportunity entails appropriateness of external enablers, known as contextual factors.

For simplicity, suppose two individuals with the same level of entrepreneurial self-efficacy identify the exact same opportunity. Based on the new perspective, this is the quality of institutional factors that foster new venture creation. As such, individuals within the contexts with missing or weak institutions may not step forward to exploit the opportunity.

In line with the third perspective, the environmental context in which opportunities emerge is an important milieu, not only because environmental characteristics open up opportunities to exploit market inefficiencies, but also they affect the entrepreneurs’ perception regarding their individual capabilities to initiate new ventures.

This view pertains to how the notion of perceived capabilities implies a dynamic relationship between individuals and their environments.

Entrepreneurial engagement is a bio-social phenomenon, meaning nature and nurture, taken together, help researchers to better understand entrepreneurial behavior. Accordingly, perceived entrepreneurial capabilities are affected by individual characteristics that evolve within an institutional context.

In other words, for nature to have an effect on entrepreneurial self-efficacy, individual needs to have their talents nurtured by the environment.

Amir Amini Sedeh is an associate professor in the Management, Marketing and Entrepreneurship Department at the John L. Grove College of Business at Shippensburg University. His email is aaminisedeh@ship.edu.