The role of the entrepreneur in small business success: the Entrepreneurship Scan
Martyn P. Driessen, Peter S. Zwart, University of Groningen, the Netherlands
Abstract
Financiers often wonder whether the person who has written the business plan is also the
person who will carry it through. The business plan is relatively easy to analyse, while the
entrepreneur is more difficult to see through. The Entrepreneurship Scan 97 (E-Scan) was
developed specifically to provide an objective measure of the characteristics necessary for
successful entrepreneurship. A literature search provided some reasons why people start
their own business, and also revealed some differences in personality between the
successful and less successful entrepreneurs. This paper presents the E-Scan. It is a
practical instrument for use on a personal computer. All the Dutch Chambers of
Commerce, a few large banks, and profit- and non-profit organisations that provide
guidance to small- and medium-sized enterprises employ the E-Scan. In addition, the
E-Scan is providing an enormous database for our ongoing study into the role of the
entrepreneurial personality in small business success.
Introduction
The success of a business is due to many factors, but the greatest determinant of a
business’s success is the entrepreneur him/herself. Naturally the entrepreneur’s diplomas,
business knowledge and craftsmanship play an important role, but in our opinion the
personality of the entrepreneur is even more important. “How strongly does the
businessman believe in himself and the success of his business?” “How persistent is the
upcoming pioneer when setbacks follow one after the other?” “How decisive can the
entrepreneur be in changing threats into business opportunities?” These are just a few of
the situations that businessmen must deal with, and there is no doubt that not everyone can
cope with these situations. So people who start up and run businesses need to know
their own strengths and weaknesses because “entrepreneurship involves the ability to build
a ‘founding team’ with complementary skills and talents” (Timmons, 1994, p. 7).
Self-knowledge through self-analysis is therefore of paramount importance. However,
self-analysis demands honesty, discipline and an understanding of one’s own personality in
relation to one’s behaviour.
What is a business plan without a businessman?
Writing a business plan is strongly recommended when starting a business of your own
(Bamberger, 1994; Zwart, 1998). Especially banks, venture capitalists and organisations
that assist (nascent) entrepreneurs need this information in order to analyse a business’s
potential and profitability. A mainly technical analysis of the marketing plan and financial
plan determines whether the business plan offers interesting perspectives for the future.
Several instruments, some fully automated, are used for this purpose.
To date, the entrepreneur himself has hardly been analysed. Banks and venture capitalists,
as well as consultants who assist entrepreneurs, stress the importance of the entrepreneur’s
personality for the success of a business, especially in the start-up phase. But their
judgement of the entrepreneur is based solely upon their indefinable and subjective
‘fingerspitzengfuhl’ (gut feeling).
A deeper understanding of the personality of the entrepreneur is needed for a sound
judgement of whether the entrepreneur will carry through the business plan successfully.
The assessment of a business plan should therefore be combined with an objective
judgement of the entrepreneur.
A new instrument, the E-Scan, was developed to measure the entrepreneurial personality to
facilitate assessment of entrepreneurs. The purpose of our scan is not so
much to select ‘successful’ entrepreneurs, but more an instrument for further development
of the personality of the entrepreneur. On the one hand, the entrepreneur gains
self-knowledge from doing the scan, which enables him to build a ‘founding team’ to
complement his/her skills and competencies, and helps assure his/her initial business
success. On the other hand, it allows the financier to concentrate solely on the business
plan in evaluating the risk of lending capital.
Such knowledge would be of much interest and value to loan organisations, such as banks,
to Chambers of Commerce, to franchising organisations such as restaurant chains, to
organisations for small business, and to government programmes, both national (in loans
to small businesses and in such efforts such as poverty-relief programmes) and
international (how to use foreign aid more effectively to strengthen the economy of
underdeveloped countries).
The Entrepreneurship Scan in theory
In 1995 we started developing an assessment instrument based on scientific research, to
measure objectively the entrepreneurial personality in the pre- and start-up phases. We
divided the personality of the entrepreneur into two categories: personal characteristics and
managerial competencies. There is a striking difference between the two categories.
“Although some researchers have provided evidence indicating that traits can be learned or
changed in later years (Mc Clelland and Winter 1969), traits are generally believed to be
stable and not subject to cursory change” (Hood, 1993, p.120). Managerial competencies
are more subject to change: “Leaders aren’t born, they are made, and more by themselves
than by external influences” (Bennis, 1989 in Kor, 1991, p.186). We believe the same
applies to entrepreneurs.
Characteristics of successful entrepreneurs
Much research has been conducted into the characteristics of successful entrepreneurs.
There are three main characteristics and five secondary ones. The main characteristics are:
need for Achievement (n Ach) (Mc Clelland, 1961; Ahmed, 1985; Perry, 1986; Begley,
1987; Hornaday, 1971), Internal Locus of control (ILOC) (Ahmed, 1985; Brockhaus,
1982; Perry, 1986; Lorrain, 1988; Hood, 1993; Begley, 1987; Gatewood,
1995; Perry, 1988; Rotter, 1966; Paulhus, 1983) and Risk Taking Propensity (RTP)
(Mengel, 1972; Dart, 1971; Meyer, 1961; Liles, 1974; Broehl, 1987 in Ahmed 1985; Mc
Clelland, 1961).
The five secondary characteristics are: need for Autonomy (n Aut) (Hornaday, 1970,
1971, 1982; Vesper 1990; Kets de Vries, 1986), need for Power (n Pow) (Collins, 1964 in
Hornaday, 1970; Wainer and Rubin, 1969 in Brockhaus, 1982; Vesper, 1990), Tolerance of
Ambiguity (ToA) (Budner, 1962 in Begley, 1987; Mac Donald 1970), need for Affiliation
(n Aff) (Bellu, 1987 in Davidsson, 1989; Hornaday, 1970; Collins, 1964 in Kets de Vries,
1986) and Endurance (End) (Hornaday, 1970; Bellu, 1988; Gatewood,
1995).
In these studies, successful entrepreneurs score significantly higher on these characteristics
than less successful entrepreneurs, small business managers, and non- entrepreneurs.
Success can be defined in many ways. In most studies success was defined as surviving the
first two or three years that the company was in business. In Hornaday and Bunker (1970)
for example, the ‘successful’ entrepreneur was an individual who started a business,
building it up where no previous business had been functioning, and
continuing for a period of at least five years to the present profit-making structure. Other
studies on the personality of entrepreneurs (Gatewood, 1995; Perry, 1988; Begley, 1987)
defined success more in financial terms, linking the most common characteristics found
among entrepreneurs to measures like return on investment, growth in sales, and profit
every year, or to the personal income of the owner/manager of the business. A few
statistically clear relationships were found and these ar e shown in Table 1. “Although
many indices might be used as criteria of success, continuity in business is the all
persuasive quality” (Hornaday, 1970, p. 50). Still, statistics about newly founded
companies show that most of them do not survive the first few years.
Table 1 also presents an overview of the characteristics of entrepreneurs in relation to the
definition of success used in this research. The relationship between the characteristics of
entrepreneurs and success measured in terms of survival is more convincing than that with
success measured in financial terms. For the development of the E-Scan we therefore
chose characteristics that contribute to success in terms of surviving the first two or three
years, i.e. the need for achievement, need for autonomy, need for power, lack of need for
affiliation, an internal locus of control, endurance and risk-taking propensity.
Managerial competencies of successful entrepreneurs
Kets de Vries (1986, p. 108) concluded that in most studies only the traits of successful
entrepreneurs were of specific interest to the researchers. Other capacities and
competencies of successful entrepreneurs were mostly ignored. “Recently, some
researchers were arguing the validity of the psychological trait as a predictor of the success
of new businesses or entrepreneurship, and formulated the hypothesis that the
entrepreneur’s behaviour should be in relation as well and predict partly the new venture
success” ( Lorrain, 1988, p. 152). Lorrain (1988) describes this behaviour as “management
behaviour characteristics of entrepreneurs”. Mayer and Goldstein (in Vesper, 1990, p. 52)
came to the following conclusion: “Although adequate capital and managerial competence
are indispensable for survival, they are rarely sufficient in themselves to ensure it. They
must be supplemented by other factors, such as motivation, hard work, persistence and
flexibility”. Table 2 presents an overview of the managerial competencies of entrepreneurs
in relation to the definition of success used in this research. There has been little research
on management behaviour of entrepreneurs and there are methodological problems in
measuring managerial competencies, so that a clear relationship with success has not yet
been found.
Existing methods of assessing entrepreneurs in the field of small business
In the development of the E-Scan, we also looked for any ‘scans’ already in use. Two
organisations, the Netherlands National Investment Bank (NIB) and the Institute for Small
