\1 042-2587 -91 -1 62$1 .50Copyright 1991 byBaylor University

Person, Process, Choice:The Psychology of NewVenture CreationKel ly G. ShaverLinda R. Scott

Psychology can be distinguished from other behavioral sciences by its emphasis on thebehavior of the individual person. Behavior, in turn, is influenceJ oy ttre way in wnicn ineexternal world is represented in the mind, and by the individual's exercise 6f choice. Trrearticle examines the Possibility. thatrelatively endirring attributes of the perion riltri "tr""tentrepreneurial activity, describes the social cognitive processes involvetl in conitructingrepresentations of the external environment, and suglests which motivational variablesaffect behavioral choices. Although past research on ';lf,e psychology of the entrepren"ui',llag-not been productiv-e, a psychological approach based bn'persons, process, and cnoiceholds promise for the future.

rln best scientific form, researchers interested in the creation of new business

ventures have attempted to construct definitions of entrepreneurship. A philosophicalfoundation for the term is provided in J. S. Mill's treatisebn political ".onorny 1iA+A;,in_ which the assumption of risk is asserted as a key ingredient of "nt."pr"neuriai activity.Modern use of the term is usually credited to Schumpeter (1934), who emphasizedinnovation and its role in destabilization of economic systems. The discipline's attention'' n shifted from the act to the actors, with McClellan-d's (1961) assertibn that qualitiesar's(ociated with a high need for achievement-preference for challenge, acceptance ofpersonal responsibility for outcomes, innovativeness-characterized suicessful-initiatorsof new businesses. This focus on personal characteristics continued (e.g., Dunkelberg &looper, 1982; Hornaday & Aboud, l97l; pickle, 1964; Timmons, lvoa1, despite'its!{lures (e.g., Brockhaus, 1980; Brockhaus & Horwirz, l9g6; carsrud, oim, a nooy,1986) and limitations (Wortman, 1987), until Gartner (1988) challenged the whoieapproach by arguing that the behavior of creating a new venture, not thJpersonality ofthe founder, should be fundamental to the definition.- _

Predictably, there has been a rejoinder to the challenge (carland, Hoy, & carland,J?8!), T-d papers listing the personal characteristics of entrepreneurs continue to flour-ish (Mcclelland, 1987; solomon & winslow, 1988;winslow & Solomon, l9g9). More-over, because the act of creating an organization cannot occur in isolation, otherresearchers have attempted to specify aspects of the social (Carsrud & Johnson, l9g9)and economic (Hornaday, 1990) contexi in which such innovation takes place. In theextreme, the contextualist position denies that the personal characteristics of organiza-tion founders contribute anything of importance tb the success of the venture"(e.g.,ll.d.i".h, 1989), regardless of whether the contribution originates in personality or inbehavior.

In summary, a substantial amount of journal space has been devotedWnter,199

to the attempt

ZJ

to define "entrepreneurship," but no consensus-has emerged. Notwithstanding this lackof agreement on a fundamental term, there has been tremindous growth in tnE stuay orventure creation. lndeed, a recent software package (EntreBIB-Fc) catalogues n"Lryl4'000 relevant entries' we endorse Mitton's (198i) conclusion that'entreprJn"u.ririp i.like obscenity: Nobody agrees what it is, but we all know it when we see it.' In the faceof such- controversy, prudence dictates adherence to op".utionul definitions, ,o irrir,"remainder of this paper we shall be discussing "new^venture creation,,, rather than"entrepreneurship. "

FUNDAMENTALS OF A PSYCHOLOGICAL PERSPECTIVEllaving limited ourselves to an account of "new venture creation,,, we believe it isuseful to describe the essential ingredients of a psychological approach to the study-ofany phenomenon. Most of you will recognize thai we havJjump"o t o- one definitionalthicket to another. There are psychologists who study the ;;sJJiu. pu-p,'-tr," "i""_trochemical process through which changes in ion concentrations at the cell membraneproduce- action potentials in nerve cells. There are psychologists who investigate mail-ematical reasoning processes in toddlers. And there are psyciotogists who eiamine theways in which entire communities mobilize in response to calam"itier. rr urt"Jio gi;"their particular outlooks on p_sychology, these various researchers might generate nearlythe controversy found in definitions of entrepreneurship.Despite this potential for dispute, psychologists have been able to agree on certaincore ideas, and these are recounted in our introJuctory textbooks to delimit the domainof inquiry (e.g., Shaver & Tarpy, in press). As a disciiline, psychorogy is rarely aenneaas the sum of the activities of its practitioners. Rather, it is"oistinidsrrea r.om oitrersocial or behavioral sciences, such as sociology, anthropology, uni".ono-i"s, uy-ii.emphasis on the individual person as the level of analysii. wTitrin this concentration onthe indivirlual Qterson), two of psychology's core theoretical concerns have been thecontents of mind (the process intervening between external world and observable be-havior), and the exercise of free choice.

Emphasis on the PersonThe basis for the boundary distinction is.the unit of analysis. Where anthropologists

emphasize cultural influences on actions, and sociologists emphasize social structure andorganization, psychologists concentrate on individuJs. A translation of the Greek rootsof the discipline's title would be "the study of human spirit or soul.,, Although therehave been diverse, if not to say contradictory, descriptioni of what a human spiJt, soul,or mind might be like, psychology has always recognized that whatever the discription,a mind exists within a single individual. Consequeritly, psychologists are predisposed tosearch for explanatory concepts that can be located *ittrin the person.'For example,when attempting to account fgr the aggressive behavior found in collections "f ;;t-mous individuals, the sociologist LeBon (1895) was comfortable with a notion tt" te.*Jo"the Group Mind. " In the.h.""9: of social psychologists, this group-based prrenomenonwas transformed into individualized processes of be[avioral cdntagion (Wheeler, 1966)l' A recent paper by Funder and Dobroth (1987) investigated the ease of judgment of 100 personalitycharacteristics, and found that among the l5 with the highe;t level of interjudge agreement were .'tends toarouse liking and acceptance," "behaves in an assertivJfashion," "is a taikaiive individual," ,.rebelliousand nonconforming," and "power oriented." These traits could easily be part of Mitton'siescripil"", "rthe "compleat entrepreneur," so it may be that we all do know ona *h.n',r" see one.

24 ENTREPRENEURSHIP IHEORY ond p|?ACT|CE

or deindividuation (Zimbardo, rg70). Not j.ust-group action, but arso group inaction, isinterpreted by psychologists in individualized-terms. wff a murder in New yorkoccurred before a large group of onlookers-virtually non" oirhom intervened-socialcommentators were content with explanations in terms of ..uputhy,, (Rosenthal, ,J,&i).But experiments designed as anatogues of the r"irirg r9o nrylilorogirt. to an explanationin terms of a sequence of decisioni made by each firai"ii"1"i'ilatan6 & Darley, 1970).Thus the first element of a psychological approach to new u"niur" creation is a focus onthe person.This view obviously contrasts with the extreme contextualist description of newventure creation.2 For.tfie psychologist, it is not enoughio tnl* trrut a certain numberof people wil respond to tie."push"', of being rurtoultJ,'o. to tn. ..puil,, of marketportunities by starting businesses on the.ir"own. n?-,-r,..,"ti. pry.torogist wants toRlow which few of the hundreds laid off will create n"* u"ntui"s, or why not everyonesees-and capitalizes upon-the marker opportunity. A word "a;;ifi i;;;;;r,history of the entrepreneurship riterature,..this broad psychorogicar approach has beeninadequately represinted by itudies oi"'trre.per_sonality of itre entrepreneur.,, Thef*g:lv fruitless quest for ttre personality profile or trre successful organization founderis what psychologists.would call a persliotogicat "no"uuo.. Such searches for transsi-tuational consistency in-p_ersonality traits went. out of style in psychology over twenryyears ago, when Miichel (1968) ;;";J;^luriu"tyit at'b"h;;i;, shourd be regarded asthe consequence of person-situatioin intfractions. withourrecounting alt of the subse-quent theoreticar discussions (e.g., see Funder & Dobroth,- tggl, Kenrick & Funder,1988)' suffice it to say that psych-oiogy's emphasis on it" p".r"" as the unit of analysisencompasses both techniques and processes well beyond ihe identificatio. oi ,p"iii"personality variables presumed to Gad to the foundi;g ;; n"*'orgunirations.

The Process of Representing the External WorldThroughout its history, psychology has recognized the biological foundation forhuman and animal behavi,or,-eiamin#the contents of mind, assumed that there wereI ts to rationalitv. and noted the.importance of the immediaie social context. But eachof-these elements of the psyc.horogilul'upioach depends on the presence of at leasr some"mental furniture" that originaLo ouiiioe.tt. orgunr.-."i"iti. sense, psychorogyfollows in the Aristotelian tridition of empiricism,"rather ttran tne platonic view thatsensory information is mere flickering shadows on the cave wall. consequently, it is notsurprising that the oris_inal truly psyciorogicar

ry,1"0 *",'plyrnopnyrjcs, the srudy ofthe relationship between externai siimulation and the internal psychological experience-oj the individual' specification of the process by which thetternal world becomesrepresented in the mind is the first of psychology'. "or" ron.".n, that is fundamental toa psychological approach to new u"niui" creation.Because psychology combines external circumstances with intrapsychic processes,it can be defined by Gwin's expression,

--

B : fiP, E),meaning that behavior is a function of both person and environment (Lewin, in cart_wright, l95l)' Neither alone constitutes a sufficient explanation for an individual,s2.SeeGergen(l982)foranoutlineofthecontextua|istposition,no,,.no'o,,ff i3:y"i11':iiifj :lfjT3::::.:"",,x,1,3:;*:.:ii.1:l1T:.u1,nc, are negotiated within the interpersonarcontext" rhus, rike the contextuarist position *i,r'r" "r* ,."ffi .ffifiil1ffiJ'iln,rilHffJ,'fJ^jsearch for any transsituationally enduring p"rronui

.n_ucteristics.

\Mnter,199,l

observable behavior. Although a person's cultural milieu and his or her membership invarious social networks and organizations certainly influence action, study of thesefactors in their own right is beyond the purview of psychology. The psychologicalquestion is how a person's cultural heritage and social neiworks be"o*" ieir"r"ntJd inmind. Answers to this question have covered the entire range of possibilities.

For example, the first general theoretical approach in psycholbgy, known as struc-turali1m, attempted to specify the irreducible elements of mind, the psychological build-ing blocks from which all aspects of conscious experience were constructed (Titchener,1898). In contrast, where structuralism concentrated almost exclusively on mental ex-perience, behaviorism, at least as first outlined by Watson, denied that anything usefulto psychology could ever be learned from the analysis of conscious thoughl: "T-he timeseems to have come when psychology must discard all reference to consciousness; whenit need no longer delude itself into thinking that it is making mental states the object ofobservation" (watson, 1913, p. 16l). For his part, Freud argued that uncon"sciousdesires and fears, not conscious thought, were the principal motivating forces behindbehavior. Not only did he believe this true in cases bt ctinicat disturbaice, but also ineveryday life (Freud, [19011 1960). Finally, William James (1890) constructed a com-plete model of the self by distinguishing the ongoing stream of consciousness (the I)from the material and psychological objects of reflection (the Me). As suggested byrecent exponential growth in what has become known as "cognitive science,; modernpsychological theory has rejected Watson's extreme behavioriim in favor of a metathe-oretical stance that gives consciousness a fundamental role in human action. Thus apsychological approach to new venture creation must involve cognitive processes thatoccur within the individual person.

This point is convincingly made by considering a behavior with a long history in theanalysis of new venture creation-the assumption of risk. Whether onJ reads tutitt otasks one's local venture capitalist, one learns that the founding of a new businessorganization involves significant risk. Yet reviews of research have often failed to findri_s\laking propensity associated with success in new venture creation (e.g., Brockhaus,1980, 1987). Putting aside, for the moment, the possibility of flawed measurementprocedures, there is an explanation for this inconsistency in terms of the cognitiveprocesses involved. Objectively, a certain proportion of new businesses fail, and in apurely statistical sense, the failure rate for a particular type of new business is a plausibleindex of the riskiness of ventures of that sort. Now the personological appioach tobusiness entry has assumed that everyone agrees on the level of risk involved, and thatsome people (entrepreneurs) are constitutionally more willing to take the chance than areother people (non-entrepreneurs). A variety of well-known cognitive processes suggestsan important alternative explanation: Perhaps those who found businisses do nolittrtabout the risks in these statistical terms. For example, a study of high-technologyentrepreneurs found that 213 of the sample did not perceive themselves to be doinesomething risky (Corman, Perles, & Vancini, 1988). One must have fear to demonstraticourage. Rather than continuing the vain search for personological risk-assumption, weshould begin to study the cognitive processes involved in risk assessment. In ihort, weneed to know how the business world is represented in the cognitions of people who do,and people who do not, found new ventures. We shall return to the isJue of risk-assumption later.

The Crucial Role of ChoiceBeyond the question of how the external world becomes represented in the person

lies another of psychology's traditional disciplinary concerns. this is the conciptural

26 ENTREPRENEURSHIP THEOI?Y ond PMCTICE

quagmire of determinism versus free will. Psy-chology has Descartes (1952 [1641]) tothank for tlling the problem. In cartesian dualism, iii. u.ov *"s a material substance,constrained by the laws of physics, but the will was unextended and incolporeal, utterlyfree of-physical limits. suCn i view leads to a position of ..indeterminisp,,-1[s s1s1-cise of will cannot be.predicted any more thin it can be controlled. Accepting thisposition would put psychologists, and others *tro r"*"h foi relularities in behavior, outof business. Fortunately foi psychorogy, dualism founders o"n it, fuilu." ; ;p;;if; "plausible mechanism for inteiaction between-the mind (will) and the body.The extreme philosophical alternative to dualism is ttre maierialist identity theory, amonism that equates.-l1o with brain (churchrand, 19gg). tn-principte (if not in facr,because of technological limitations), ali mental events a.e, si.,lttuneously, neurochem-ical e.vents in !h9 physical brain. Not surprisingly, ia"niity trreory takes the form of---

lard" determinism. Stated in the extrem", ir ai-"ntd u"tiuity is actually n"u-.h"*-ical activity in the brain, then that neurochemical activity .urt-tiuu" had some precedingcause, and that cause must have had some preceding ciuse, until ultimat"ry tf,. ."lr.r-sion reaches the joining of sperm and egg to form ,n&-u.y""i" human, and that joiningis the result of causes external to the eir--bryo. In other *oidr, behavior is best regardedas determined by forces outside the particular individual. tn'psycrrology, the hard de-terminist position has been argued most forcefuily by stinnJ.ie.g .,1blD, although

f'reu-d's biological determinism is no less antagonistic than Skinner,s to a notion offreedom of choice.The debate between advocates of free will and advocates of determinism is of morethan academic inreresr.to. psychology. Some forms of p.y;i;;;rapy assume that clientscan choose to change their actions. Fsychologists ofr#eipe.t i"riiritt"v uuout t",nporu.yIapses in volition among criminal defendantslPsychologiJts stuJy attitude change, socialinfluence processes, and sources of resistance-to corifo.-ity iressures. None of thiswould be possible unless one were to assume that under nor-ut, everyday, .onJition.people can make choices. on the other hand, determinists *gu" that unconstrained

choice all but eliminares the predictablity of behavior. n"Jiiir,.'d;;.;;iii,;'i,assumed away, what business- do psychologists have in searching roi regutaritie's inbehavior? Fortunatel:r, psychologiris hau" been able to settle flr a position known as.

- -,rft determinism. " This position follows the activity tnrory oi'"ausality first specifiedby Thomas Reid (1863). The theory holds that .uu*tity iti rru1nun behavior is funda-mentally different from causality in physicar systems (which *. p.".u-"d to be com-pletely deterministic)' specifically, iteid asserted that rhe notion of determinism wasincompatible with the universaltruman experience of deliberation, choice, and with allsystems of morality. Moral judgments make sense only if people are tirought to ilecapable of making choices for which they can later be h;ld d account. capriciousnessand unpredicrability are.avoided

-br, qtr" presumption that menral events, lit" p-rry.i."revents, are characterized by regularities that science can discover. Thus the soft deter-minism-position agrees with indeterminism that mental events need not have externalphysical causes, but agrees with hard determinism that all behavior is caused by ,;;;-thing----either an internal mental event or an external physical event. Needless to ,uy, unypsychological theories that involve cognitive maniputation-oi-inro.-ation must alsosubscribe to a soft determinist position on the issue oi free will. And this includes nearlyall psychological theories thai attempt ro account for human fi;;;: e;;;;fi;,choice is the third feature of our approach to the creation of new ventures.A comprehensive p.sychological portrait of new venture creation will ultimately haveto show how the individual's cognitive representations of the world get translated intoaction' To.accomplish this purpose, it wili ultimately be necessary to consider generalorienting dispositions (such as attitudes), motivationar pii*tpr"r (such as subjectiveWinter,199'l

expected utility), and personal motives (such as achievement motivation). It should benoted that choice for a psychologist is not always the same as the rational decisionmaking inherent in economic.theory. Important psychological models of social behavior,such as exchange theory (Kelley & Thibaut, tg1u, do aisume that people,s actions aredirected by a desire to maximize their own outcomes. yet, there are significant excep-tions, perhaps the most familiar of which is the idea ttrut g.ouf processes can obscure thefacts and produce faulty decisions (Janis, rg72). A th;;G;'p'sychological "pf.o*r, tothe study of choices involved in new venture creation must-incorporate both the rationaland the irrational features of decision makine.In the pages that follow, we describe h6w consideration of person, process, andchoice can illuminate the study of business founding. In;Jsection, we describe oneexample in detail, and then briefly mention others ihat should atso be considered. Noattempt is made to be.exhaustive; our objective is only to present the possibilities ol apsychological approach to new venture creation.

THE PERSON, NOT THE PERSONALITY

-

As noted above, psychology's focus on the person as the unit of analysis should notbe construed as equivalent to iiearch for personblogical variables that, regardless of thesituation, produce behaviors that lead to tire creation of new ventures. Ear-ly in psyctrot-ogy's history as an experimental science, woodworth (1938) described the rela'tionshipbetween the environment and the person by noting thaf the environment was the sourceof stimuli impinging on the organiim, wtriitr then f,roduc"o u *"aru.able response. Thisstimulus-organism-response (S-o-R) view constrasted with Watsonian behaviorism,sclaim that the o contained nothing of theo^retical importance. Most modern pt.h;i;-gists subscribe to some version ol the S-o-R modei, but all iecognize that onty ttrestimulus and the response can be observed directly. Any and all of ttt" *g"nir-i"variables (the various o states) must be inferredfrom the reiationships observedi"t*""nclasses of stimuli and classes of responsei. what this means, u-ong other things, is thatno particular o-explanation is any more "r:11_, than any other. Some psychologists will,therefore' infer enduring personality variables from observed relaiionships"uet*e"ns.timuli and responses, whereas othei psychologists will instead infer cogniiive, attitu-dinal, or motivational variables. Having-learned-sometimes the hard wiy-ttre timitsof inference in their graduate training, most psychologists regard with a healthy skep-ticism any claims that a particular S-R conneition haJbeen riediated """tu.iGy-L-fusingle-sort organismic variable.

Risk-taking PropensityThis skepticism is first directed at methodology, and that is precisely the reason thatpsychologists are wary of research claiming to iirow that one personility variable oranother is characteristic of people who found new ventures. A specific example illus-trates the point.On the reasonable assumption that the creation of new ventures involves risk,students. of entrepreneurship began to investigate whether founders where higher-inpropensity toward risk than were people who did not start their own businesses."Unfor-

SnatefY' the vast majority of this research (reviewed by Brockhaus, 19g0, and later byBrockhaus & Horwitz, 19g6) has employed ,o*. u".iion or tne ror""'*Jw"iil.i(1964) Choice Dilemmas Questionnai.e (coQ) as the measu." oirirt-tit ing p.op";;itt.The measure was originally developed by Stoner (1961) in a master's thesis at the MIT28 ENTREPRENEURSHIP THEORT ond P|?ACTICE

school of Industrial Management, and having.been appropriated by psychologists, themeasure has now found-its way back into buiinesr ."."*.tr. rne boe consiits or-tzshort vignettes in each of whictr a protagonist is attempting to decide betieen u ,ur", uu,dull, alternative and a m9r9 intereiting, but risky atternative. [n much of the research onnew venture creation' subjects have read these vigneftes only once, and have indicatedwhat probability of success (of the risky alternativi) they *outo need to have in order roencourage the protagonist to take the chance. The average of the required probabilitiesof success is then interpreted as indicating the risk-takitr"g p.tf.nrity of the subject.

-Following this tack, however, is very likely to invoiue ai least three fundamentalmethodological problems. First, the judgmentr ihut the subjects are, in fact, directed toma\e fo1 a.nother person (the protagonisi), are being inconLctiy interpreted'as identical' the choices those same subjectJ would make foi themselves. Now there are timesF?nt in psychological research, the dependent variable is so heavily loaded with socialdesirability-that subjects are asked "whai most people would do," in the expectation thatanswers will reveal the subjects' own tendencies.-But such reiearch typically containsindependent variables that have been manipulated by the .*p".i*"nt.., and the onlyclaims made concem differences between experimental conditions, not the degree towhich one self-selected group of people (buiiness founderg, as opposed to anotherself-selected group (managers), poisesies the tendency rn queition.

The second problem is that in risk-taking propensiiy resiarch, the cDe is being putto a use for which it was not designed. es emptoyed by Kogan and wallaci (l96aiindby legions of other.psychologisti, the CDQ was ttre vehi"cle to measure changes rnexpressed levels of riskiness that occurred as a consequence of group discussion."In thel-arse1 society at the time, the peaceful civil rights demonstraionj were occasionallydeteriorating into group.violence. As part of pJychology's attempt to understand thisproblem, Kogan and Wallach wondered whethei dinusloir'orresponsibility among mem-F* :{ a smallgroup led the group to engage in hostile and agglessive behavior that noindividual would have undertikenon his-oiher own. To "*uiTn" the effects of discus-sion, researchers interested in what was then called the "risky shift" would first haveindividuals respond to the CDQ in private, then would have the group discuss each itemt- ronsensus, and finally would have individuals rate the items-again. The CDe neverhtderwent the sort of reliability and validity testing that would 5e required foi a real"personality

measure," because the dependent variable of interest wis the change inriskiness expressed from before to after discussion. In short, the psychometric propJrtiesof the CDQ are unknown (although in the normal course of evenis it was discovered thatsome of the items produced conservative, rather than risky, shifts). To use such ameasure as the index of a relatively enduring personality trait is a serious methodoloeicaleror.

Third, recent reearch on what is now known as the "choice shift" (reflecting the factthat on some items the actual shift was in the conservative direction) makes a very strongtheoretical case against using the cDe as a measure of risk-taking propensity. s*",evidence. ever.supported the notion that diffusion of responsiUifity wai the .uu." ofchanges in riskiness from before to after discussion. Indeed, a number of studies showedthat face-to-face discussion was not necessary, provided t'hat participants were showntranscripts of what other people had said. Theie findings led investigaio.s to concentrateon the information that was normally exchanged duing a typical discussion of eachvignette. For each of the twelve items, subjects think up

"a u#"ty of arguments in favor

of the risky alternative, and a number of arguments agiinst that same alternative. Eachargument can then be rated for persuasiveness, and theie ratings can be used to calculatethe relative persuasivengls of the argument pools in favor of,"and opposed to, the riskyalternative. Items for which the perzuasiu"nis of the favoraure pooi was greater turn"i

29

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Winter.1991

out to be those on which there was normally a risky shift. Items for which the opposingpool was more persuasive turned out to be those on which there was normally a con-servative shift. Moreover, Burnstein and Vinokur (1977) showed that whether an indi-vidual participant would shift in the risky or conservative direction depended on therelationship between that person's own argument pool and the group pool discoveredthrough discussion or some other exchange of arguments. Thus, at the individual level,it is the person's information, not his or her personality characteristics, that determinesthe direction of shift. One needs no better reason than this to discard the CDQ as aputative measure of a personality trait.

Locus of ControlSeveral other personological variables are frequently enumerated as part of the

"personal" characteristics of the creator of a new venture. For example, in a recentanalysis of the entrepreneurial process, Bygrave (1989a) presents an embellishment ofMoore's (1986) model that includes need for achievement, internal locus of control, andtolerance for ambiguity, in addition to risk-taking propensity. Only two of these vari-ables-locus of control and achievement motivation-have received wide attention inthe entrepreneurship literature. In contrast to the case of risk-taking propensity, both ofthese variables have been assessed with instruments designed to measure individualdifferences.

To investigate expressed desire for control, many investigators have used the Rotter(1966) lnternal-External Locus of Control scale (e.g., Ahmed, 1985; Cromie & Johns,1983; Timmons, 1978; Venkatapathy, 1987). Doing so, however, is at least a tacticalmistake. As Rotter (1990, p. 491) himself has recently stated,

In studying locus of control, because we were dealing with a broad construct in-tended to study behavior in a variety of situations, we wanted to sample manydifferent situations without making the total score more dependent on one kind ofsituation (such as school achievement) than on another (such as political involve-ment).

Given this objective, it is not surprising that factor analyses of the I-E scale haveroutinely revealed multiple factors, typically distinguishing beliefs about personal con-trol from beliefs about political systems or interpersonal relationships (e.g., Collins,1974;Levenson, 1981). Moreover, as Strickland (1989, p.4) notes, elements of Rotter'ssocial learning theory "would demand that reinforcement value and the intricacies of thesituation in which behavior is occurring be taken into account for the most preciseprediction. " Thus the global scale may not make valid predictions in the specific settingof new venture creation; a domain-limited scale such as that proposed by Paulhus (1983)would be a preferable alternative. In fairness it should be said that the I-E scale hassuccessfully predicted behavior in a variety of interpersonal and health-related settings,and appears related to perceived control, optimism, and physical well-being (see Strick-land's 1989 review). On the other hand, past success, as they say on "Wall StreetWeek," is no guarantee of future performance.

Achievement MotivationOf all the personological measures presumed to be associated with the creation of

new ventures, need for achievement has the longest history. Indeed, McClelland's

30 ENTREPRENEURSHIP THEOI?V ond PI?ACTICE

(1961) initial assertion that need for achievement (nAch) is rhe psychological moderatorbetween Protestantism^and- economic growth. can tegriimar"iy' u" regarded as havingoriginated the search for the "p"..onility characteistics of the ,u.-..rrrurl"i;;;;.-neur'" Remarkably, although thit quest is now thought quixotic, achievement motiva-tion remains perhaps the oniy.personological variable"whor" urro"lution with new ven-ture creation appears convincing.

Achievement motivaJion was originaily defined in.Murray's (r93g) system of per_sonality' In philosophical terms, Munay's was.an identity trr"*y of personality, holdingthat personality "may.be defined as the-governing organ, o. iup'e.oroinate institution, ofthe body. As such, it is isolared in the biain. N9irai"n, n"p".Jonurity,, (Munay, r951,p.267). consequently, aneed was a 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 something difficult. To master, manipulate, or organize physicalobjects, human beings, or ideas. To do this as ."pioiv, *o as in"depeno'e;irt;,possible' To overcome obstacles and attain a high ttunJu.o. ro excel one,s self. Toriv-al and surpass others. To increase self-regariby ;h. ;;;..tsful exercise of talent(Munay, 1938, p. 164).

Depsite its focus on the whole individual (Murray introduced the term..personologi-cal"), Murray's theory retained the psychodynu.i" r..g., ei.*oian) assumption thatunconscious processes guide behavioi. For our purposeJ, this assumption leads to themethodological expectation that the assessment oi ne^"ds must involve projective, as wellas objective, tests. His projective Thematic^ Apperception teit (TAT) quickly'becamesecond only to the Rorschach in breadtn orapptlcation, uJ*as the originuirn.uiu..used in the assessment of achievement motivation t..g., Ly McClelland, Atkinson,Clark, & Lowell, 1953).

. .Some 25 years later, Fineman (1977) would be able to describe 22 measures ofachievement motivation, only a few of which were projective. More recently, Johnson('^90) reviewed eight measures that have been invotvea in examining ttr",liuiio;rhlpt''aveen achievement needs and new venture creation. Two of these-the TAT and theMiner Sentence Completion Scale (MSCS Form T; Miner, lgglFare projective mea_sures' Two are subscales of larger personality inventories-the Edwards personal pref-erence Schedule (EPPS; Edwards, i959) andthe personality n"."u..t Form_E (pRF_E;Jackson, 1974). The remaining four-the Lynn Achievement Motivation questionnaireILAMQ; L1nn, 1969), the Melirabian Achievement Scale (MAS;Mehrabian, l96g), theSentence completion.fT, rscr' Mukjerhee, 196g), and the work and Family orien-tation lnventory (woFo; spence & i{elmreicrt, iqs:Fui. specific to achievemenrmotivation, aqd_freouSltrv wepjesigned to overcome what werl regarded as probremsin the original TAT measure.a Fineian's (1977) review examineo 7g cases in which3' Given the tendency to consider achievement motivation as a personological variable independent of:J,T;11"1':lT:1i::::;'j::'j,Tj3r*l1T :qi:l,l i'npo'tuni.r"'"ffi'Mu,,uv', theory were press(plural and singular are the same form). These were attributes or p-p.ni.r ot.-i.-"iiui..,, "1 ;Hii;:iacted to impede or facilitate the goal-directed behavior of the individual. lVloreover, Murray distinguishedi!frn{:;i:

(the objects as thev reallv are) ftom beta press (the objects as they are p.i..iu"J'ry ir,"4' The most pervasive problem was the failure of rAT-like measures to predict achievement behavioramong females ' Given the dated, highly sex-role stereotypediature of the pictlures actually used in the TAT,this is understandable. Indeed, futuie users of the original ref pi.t."r"""gi, r" * required by editorialboards to insist on a gender-based limit for generalizaiion ot..r"'u..tr inu"r"i"g tt" original TAT pictures.

Wnter.'t99,| ..,1

correlations among measures had been computed, and in only 28Vo of these instanceswere the correlations positive and significani. Johnson's (t99b) review, specific to theentrepreneurship literature, added no studies in which there had been crois-scale com-parisons, but did find a relationship between achievement motivation, however mea-sured, and entrepreneurship, however defined, in 20 of 23 studies. The reasonableconclusions Johnson draws 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 needed before future research can make substantial progress.From a psychological perspective, of course, "careful operationalization" of achieve-ment motivation would necessarily include attention to lssues of scale reliability andvalidity-psychometric niceties all too often overlooked in the past literature on n"*venture creation. Notwith,standing the various conceptual and methodological issues yetto be resolved (Frey, 1984), achievement motivation remains the perso-nologist's blstcandidate in the attempt to account for new venture creation.

Method and ContextMany of the lessons inherent in research on the person variables associated with

entrepreneurship have been noted before (e.g., Gartner, tqgg; Low & MacMillan, lggg;Sexton & Bowman, 1985; vanderwerf & Brush, lggg), but three bear repeating here.First, don't send a scale to do an inventory's job. If your goal is to ideniify th"e rela-tionship between a particular personological variable ind niw venture creation, use apsychometrically respectable instrument designed for "trait" assessment rather than forsome other research purpose. Second, don't confuse a single score with the answer.Adhere to the principle of multiple operationism (campbJll & Fiske, 1959), whichdemands that conceptual variables be measured in more than one way. Such researchtactics are essential not only to assess the relative performance of the multiple measures,but also to discover whether the underlying variible is unidimensional oi multidimen-$oryI. Third, don't ignore the context. Is the instrument itself domain-specific (like thePaulhus, 1983, Spheres of Control scale's three subscales) or domain-general (iike theoriginal Rotter, I-E Scale)? A mismatch between scale and assessment environment willproduce confusion. Even if the scale and the domain match, the assessment outcome islikely to be compromised if the demand characteristics of the setting (Orne, 1962) andpressures toward socially desirable responding are ignored.s For both methodologicaland conceptual reasons, then, psychology's view of new venture creation "on"entLt",on the person in his or her situational context.

THE PROCESS OF SOCIAL COGNITIONNot even the most resolute advocate for enduring "personality differences between

entrepreneurs and nonentrepreneurs" would argue that a complete map of the humangenome will reveal a specific gene that can separate new venture founderi from everyoneelse. Variations in entrepreneurial activity within the individual over time, betiveenindustries, and across political boundaries are too obvious for a purely genetic expla-

5. Social psychologists routinely assume that research participants are actively anempting to discover thetrue purposes of the study, and the demand characteristics are the sum total ofthe "u". uiuilubl" (whetheror not they might lead the subject in the correct direction). Moreover, researchers need to be aware of thesocial. desirability implications of questions they ask. Finatly, any interchange between researcher andparticipant should avoid evaluation apprehension, the subject's tendency to resfond in a ..typical" fashionto avoid appearing "different" (Rosenberg, 1965).

ENTREPRENEURSHIP THEOTT/ ond p|IACT|CE

\nation to be prausibre. Environment is_ crucial. consequentry, the psychorogical per_spective on new venture creation should """.i4* rr.iutiiui'"*,"-ar environment be-comes represented in experience. Because the creation of-a Lusiness venture is, funda-mentally' a social.activity, we shall concentrate on processes of social cognition. Theseinclude aspects of attention,.rnarrtoty, "ategorization, and-inference (Fiske & Tayror,l99l)' but the approach can be illusirated riith two r"r."-i^"o"tent areas-hypothesistesting and attributions for success und fuilur".

Cognitive HeuristicsIn the process leading to creation ol-1.new venture, ..opportunity recognition,,isoften described and treatJd u, u f..y lnlredrent:

Entrepreneurs see ways to put resources and information together in new combina_tions. They not.onry iee.thl system as.it is, u", "r-ii'n'rlit be. They have a knackfor looking at_the usuar and,."i'g tr,"il.d, ;;;:'ordinary and seeing theextraordinary' consequently, they.in ,pot opportunities that turn the commonplaceinto the unique and unexpelted (Mitton, 19g9, p. l2).

Environmental circumstanc.gs do not parade past like so many conventioneers, some ofwhose badges say "inreresting prospecr,;'*i".Lur;;;;;y ..dud.,,Rather, oppor_tunity recognition, like beaut-yj is in trre t;-;*L",i.i;d;i..HJ* ao"Jlil; ;5i.""process the incoming informaiion? To whai internar rr""o*J. rs rr compared? No re-search on new venture creatio.n.directly address;;;il;;;, our rt. social cognitionIiterature suggests some possibilities.

For example, consider the question, "what is the likelihood that Restaurant X willfail in its first year of operation?" soptristicatea "";p;;.lilip ."r"*hers recosnizethat this is a controversial question, u'uiit" definitional i.;;tili;;k" i;;; *""rtlt"ryto be lost on "ordinary folki" outside the academi. ";;;;;6. so instead of answeringth'question with queitions ald quatiRcaiions, th9s9 people a.e litety to give a numericale'-,nate. But because people are nor good intuiti";

.;;iJ;;;ns, this judgment underuncertainty is apt to be influenced by"at least three- iiiiiir'i'n"uristics-availabitity,representativeness, and anch_oring (Kahneman, slovic, & Tversky, 1gg2; Kahneman &Tversky, 1973; Tversky & Kahiei""", f qzi, e p"rron *nolur, read about anotherrestaurant's closing in the morning paper wlr live a'trifi;.;;ri-"te of failures rhan willa person who has not seen suchl^story in u rong iiti.-i,rt.'uuuilubility heuristic). Aperson for whom Restaurant X is typicaf of successfur "rtiri.n.ents will make a lowerguess about failure than will u p"..- for whom tne nestauranlx ,"r"*ules failures (therepresentativeness heuristic)-. Flnally, a perceiver *rro mo*s-itru, ,n "" local restaurantshave failed will make a smaller estimate than a perceiver who has been told that 10,000restaurants have fa'ed nationaty (the anchoring heuristict. - *

why should researchers inteieiteo in new venture creation care about such cognitiveheuristics? For one thing, they prouio" a social "ogniti;-ultLatiue explanation forphenomena frequentry_int"rp."i"a in ott., theoreticait".-r. er'one example, scherer,Adams, carley, and wiebe (19g9) .tro*"d-that prese;;; "r"" enrepreneurial parentwas associated with increased expecrancy or "nt"rinfu;

.;;;;*uriar career. Schereret al' made a strons.case that.the p*"nt provided-a.ot" r6o.t whose activities andbehavior r".. ".ul"uted through " rlr.r'"rrodering.onriJ"nt *ith Bandura,s (1977)social learning theory. But the-child.en oient epreneurial parents have more than a role

Winter.199,t 33

model, they also have information that is unavailable to children whose parents did notstart or purchase a firm. The way to tell the two explanations apart, of course, is toexamine the contribution to child's entrepreneurial interest of parent's venture success.Unfortunately, the study was only able to measure the child's perception of parentsuccess. So the social cognition alternative cannot be ruled out. The larger conceptualpoint is that the social cognition processes are no more-and ns ls5s-2n inference fromthe data than is the notion of vicarious learning from an effective role model. Each is anO-variable that accounts for the observed relationship between the S of entrepreneurialparents and the R of child's expectancy of an entrepreneurial career.o

Success, Failure, and PersistenceCognitive heuristics guide judgments under uncertainty. When outcomes are known,

other processes of social cognition enter the picture. Before proceeding, it is importantfor us to specify more carefully what we do and do not mean by an "outcome." In arecent application of chaos theory and catastrophe theory to entrepreneurship, Bygrave(1989b) notes that organization founding is a discontinuous change, and this view oforganization creation as the singular event to be explained is inherent in other accountsthattake quite disparate theoretical positions (e.g., Aldrich, 1990; Gartner, 1988). Weagree that the actual founding of an organization is a discontinuous change, but do notbelieve that it is the only "event" to be explained. Nor is it likely that the founders ofnew business organizations would agree that they have only done one thing. Rather,founders would probably argue that they have done many things in order to get to thefinal one.' Thus we believe that the discontinuous creation of a new venture is precededby a series of prior discontinuous events, each of which can be considered a separate"outcome." Such outcomes might include identifying a market niche, designing aproduct or service to fill an identified need, and establishing the company. Note thatthese are only a few of the "outcomes"; they are not intended to exhaust the possibil-ities. Moreover, it is not necessary that the researcher be able to specify all of theoutcomes in advance. Social psychologists would be as comfortable with the founder'sown list of outcomes as they are with people's natural cognitive categories (Rosch,1978) or people's chunking of behavioral events into discrete sequences (Newtson,1976). No matter how the sequence from initial idea to new company is segmented, thesocial cognition approach argues that the explanations potential founders offer for priorsegments will affect the likelihood of the final discontinuous change.

Of particular interest are the attibutions potential founders form to explain suc-cesses and failures in business-related activity. Attribution processes were first describedby Heider (1958), who noted that the essential elements of task performance wereability, intention, effort, task difficulty, and luck. When an action is intentional, itssuccessful performance depends on the combination of the two internal elements (abilityand effort) with the two external factors (task difficulty and luck). In each of these pairs,

6. The same is true for any account that depends on the assessment by an individual, or a group ofindividuals, of the probability of an uncertain outcome. Thus, for example, when population ecologistsargue that "potential founders may be frightened by relatively high or increasing death rates" (Aldrich,1990, p.9) they are making an inference about a psychological moderator (fear) that psychologists wouldargue follows in time the gathering of information. Parsimony alone would suggest that purely informationalmoderators such as cognitive heuristics should at least be ruled out before higher-order moderators areinvoked.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 byentrepreneurship theorists

34 ENTREPRENEURSHIP THEORY ONd PMCTICE

!the first element is stable (a person's ability does not change dramatically from one timeto the next, and the difficulty of a given iask is a constait relardless or *ni.t p".ronattempts it). The second element in each pair is variable 1a persJn's effort varies, "'Jin.capriciousness of luck is notorious).

Building on thes_e distinctions, weiner, Russell, & Lerman (r97g) developed anattributional model of persistence in achievement tasks, and the model can be adapted tothe founding of an organization. In a technological start-up, for example, before therecan be a new organization, the founder-to-be riust at minimum develop ano tesi pioio-typ:s, conduct appropriate market research, create the standard financial p-p"ii-r,and construct a business plan suitable for securing venture capital. Rarely is ealtr orthese activities completed to the founder's satisfactlion on the first pass. Consequently,such a founder will typically havg multiple. failures to explain, andwill have to persistin the face of those failures in order to reach the ultimate oui".iiu.. In weiner, Russell,-

'd Lerman's terms, the potential causes of each of the failures could be lack of ability,lack of effort, insurmountable difficulty of the task, bad luck, or,".t, *r,* id;;;*,as the intentional barriers erected by people who might not want to see the venturesucceeo.

. 3" .u*gus potential causes can be described by three theoretical dimensions:stability (stable or variable), locus of causality (internal or "*,.*uiidunJ-i",."ri"""ri,y(whether or not production of the effect involves the founder's intentions, the intentionsof other people in a position to influence the outcome, or some combination of the two) .These three dimensions are not entirely independent, because intentionality on the partof the founder would be necessary for there io be an attribution to the variable-internalcause of "effort. " People simply do not exertthemselves by accident. The model *ju.,that the positions of the various elements on these three dimensions produce one of twokinds of internal effects. By itself, the presumed cause's location on the staUitity Jl-mension determines expectancy shifts. If the failure is attributed to bad luck (external,variable), or to insufficient internal motivation (internal, variable), the perceiver canreassure himself or herself that in the future things will be different. In contiast, the locusand intentionality dimensions combine to produce the affective reactions oi pride orshame' Specifically, slram9 results only if the outcome is attributed to an intentional, andinternal, failing' Turning back to the positive, observable, behavior of persistencei, the-.nders-to-be can be expected to persist after failure only if they believe that their stable

capabilities are equal to the task, that the variable elemlnts of the equation (their owneffort and the contributions ofothers) are subject to their intentional control, and that theemotional consequences of repeated failed attempts are less negative than the emotionalconsequences of declining to try.

This attributional model was originally derived as an explanation for achievementmotivation, and it has been found to predict achievement behavior in a wide varieiy ofsettings (much of this research is reviewed in Weiner, 1986). Moreover, the principlesinherent in the model have been generalized beyond contemporary American culture tosocieties with dramatically different economic_ind social .yit..., such as the people'sRepublic of china (Stipek, weiner, & Li, l9g9). Thus the model can easily be tians_planted to the study of new venture creation. A first effort in this regard has recently beenreported by Gartner, Gatewood, and Shaver (1991). Briefly, theJe investigators askedpre-venture clients of a Small Business Development Centeito explain wtryitrey wantedto enter business . In addition, each participant was asked a compaiable . . why' ' questionabout two kinds of purchases-the last automobile purchased, and the last piece orsports

I .*:pi,: the similarity in the terms, artributional locus of causalityindividual difference variable of "internal-external locus of control. "

Winter.1991

rs conceptually distinct from the

or. fitness equipment purchased. The participants' free-response answers were thensubjected to an attribrrtional coding thaicategorized each uni*". according to whetherit was internal/external, stable/uu.[b1., and ieflecteo u "uur" or a reason (a version ofintentionality). Analysis of the results showed, for example , that luvo of the businesschoices were explained in internal terms, whereas r.*", itun'35vo ofthe choices in theother two categories were explained in internal terms. aritrougn more research in thisarea clearly needs to be done, these preliminary findingt inoilur" that the attributionalmodel can profitabry be appried to the study of n"* u"lnt* .."ution.

Representations of External Circumstancescognitive heuristics and attributional principles are part of the psychological accountof ways in which the external environment becomes

ryPreseil in the mind of a personwho might become the founder of a new venture. For this reason they represent theinternal process presumed to mediate between the stimuli (suctr as ..opportunities")presented by the external environment and lhe responses fruch ur ..organization found-ing") that are critical dependent variables in the study of new venture creation. varia-tions in the process of social cognition can herp. "*pruin *rry not ail peopre high inachievement motivation (or any othe. personotogicai variable'reliably associated withnew venture creation).actually found organizations. Additionally, theories or ,*i"rcognition must be considered c-ompetition-for uny otrr". .^pru*tory principles that findtheir .way through the heads of organization founderr. o" ttr"i. face they are no moreplausible, or less plausible, than oiher o-variables such as sociat tearning, role expec-tations, or prior organization deaths. The challeng" roi rutu." ,"r"ar"t, on new venturecreation is to find convincing ways to distinguish

"on" ru"r, "*planation from the others.Unfortunately, the experimental iesigns that are a staple of psychological research maynot always be appropriate in the study of new venture creation.

when facing the task.of disentangring competing o-variables, psychologists doexperiments that occasionally stand thJorilinal p.opolition on it, t"iJl r..-";;*;,rather than searching for personological difierenc""i";;;;-,-i"uy or risk-taking propen-sity, shaver, williams, and Scott trqqol used a bogus test oi.nLp..neurial abilities toconvince subjects that they either were, or were not,-lik"ly candidates for the ro*oingof new ventures. overall results showed several effects for this belief. people whothought they had entrepreneurial characteristics "*p."r*o!.*ter creativity and achieve-ment motivation' Moreover' on items dealing *ittr uurln"rr .isk (but not on itemsdealing-with personal risk), males who believeJthey *".".ni."p.eneurial selected morerisky alternatives on some cDe items and on "o-p*uure i[ms designed by scott(1e90).These studies .uI: ,*g important poinrs. At the empiricar lever, they show that asocial cognition variable-beliei in oneis entrepreneurialiendencies-affects responsesthat may be related to success in new venture creation. At the conceptual level, theybolster our concern about the."personality characteristics'; apfroach. when scores onmeasures that have been used in personological research canii manipulatedby instruc-tions in.a brief experimental setiing, one"must wonder just how ..enduring,, are thepersonality characteristics these measures purport-to identify? we recogni ze thatexper-imental designs, which uue common in psyinological re"search, may not arways beappropriate in the study of new venture^cieation] on the otte. tano, ,o-" {uuri-experimental designs (Campbell & Stanley, 1966; Cook a-CarnpUef l, l91g)can serveas excellent substitutes. lt jhe very reastj we would echo receni calrs (Gartner, 19g9;Low & MacMillan, 1988) for proqpective research on organi"aiion founding.

36 ENTREPRENEURSHIP THEORY ond pMCT|CE

TIIE EXERCISE OF CHOICEAt the risk of belaboring the obvious, new ventures are not created by role models,support networks, or the itate of the population ".o..ying capacity. New venruresemerge' and take $e form they do, uecauie iriin" laiu"rit" "t oi"". made by individualpeople' Not surprisingry, rhe,rr"a'airii"e"pr,i"fr""t;;';i".p.ychorogicar

approach tonew venture creation is its focus on thE i--"-oiut.*li,J..o.r,o of choice, From theperspective of the potential founOer, two questions u*..11i"uf, ,,Can I make a differ_ence?" and "Do I want to?': The ilrior tt"r" in;r* o"rl"i".o contror, whereas thesecond requires consideratio" "a;;r;;"tional processes.

-,.erceived ControlIn Mitton's q.9s2) view, "Entrepreneurs prefer to take and hold unmistakablecommand" (p. l3). They know rt.y'.rn make a differeie, and they berieve they,personaty, can exerr.o,nqgr ou.. pJopt. u"o ""*tr.^iioi'i"u.n the mosr ,.compreat,,entrepreneur, however, berieves rdi;; o1 she .un .on,.ll lverything. perceived con_trol-unlike the generaliz"o

.*p".tuniy ro, rnt.-;iiffi Jf .ont.or, or the need forffilfiiifffl::" tn' rvpe e'L!r'""1"' pattern (Friedman & Rosenman, le74F-isMuch of the recent psychological writing on issues of contror among adults hasconcentrated on the behaviorat efficts of losiig ioir"i"a.""g orher things, this ma_terial inctudes psyclrolog,"ur i.*-t^u-*;,i:"_"d";t;il;ni;l.uno tr," effecrs of controlon intrinsic motivation' rtyttotogi.uireactance i, ir,. .notiuutional state aroused whenexisting freedoms are rest;cteo oi ttrieate",:d_(B:.ilr'iiio, g*tm & Brehm, lggl).what makes ir interesting i. ;il;;';;" is produced uy the demand rhat ,,you must,,do somethins vou *ouri tuu".to..n';";" '"; ; ; ; ;#:The key issue is ross offreedom to rfioose,^n".lg_" id;ffiq::

_: something distastefur. where the ross ofcontrol persists over time, learned help'lessness- may ue- tt"-."rutt (seligman, 1975).Rather rhan continuing 1o. figh;; ;; ;;;:';" simprv sir";6:lccording to the reformu_' 'd version of rearn;d h"fit.;,;.ia9o,

,i,J a?r",".iJ"s psycrrorogical effects areg*atest when fa'ures are attributed to i1i;-;i,;;il;i,.i"s, and are expecred rogenerarize to other situations reu*.o"n, Setigman,-a1.iro"r", lgTg). wtrere terp_lessness is often a consequence of inaccurate at;ibutions ro-thJself, intrinsic motivationcan be reduced bv correct attributions ol fontror ,o .*r.,nuirorles (Deci & Ryan, r9g0).specifically' "utn rewards ro..u"..rrruiturt p".ro.rnu".i .r" t""e debilitating effectson intrinsic motivation uno r"rra.[..]nur.n, ir trrai-reeai;i ,, seen as controring,rather than compe"i::.{il;ti;;;i} Ryan, tt*i. ilil risk of oversimplifyingeach of these perspectives, the aiswer to tn. qu"rtion'.iCu" irnu*e a difference?,,willbe affirmative-onrv if the pe;;;;;;;;r;"., the choice t* ". r,"r. to make, b) has someinitial success thai can-be aftriilJ'i;';;ry, permitting (c) intrinsic interest in theproject to be maintan"a' onlt ufu* iiir',rr. way in whicfr the potential founder rhinksabout reality, not the externar

..irity ru.tr, ,nu, determines the ourcome.

Outcomes and ExpectationsBeing abre to make a difference is not the same as wanting to do so. The foundersof new ventures give a variety of ."ur*i'*f,." urf,J*fi,'ffi estaUtished their busi_nesses. Many of these have i.""nrr/!."" ;;;;o"r"rlli?r88), and incrude (in

Winter.1991

descending order) desire for autonomy, interest in personal achievement, dissatisfactionwith current job, desire to make money, and unhappiness in current career. In both thepsychological literature and the organizational literature, such motivations have typicallybeen described in terms of some form of expectancy theory (e.g., Atkinson,'1964;Feather, 1982; Fishbein & Ajzen, 1975; Vroom , 1964). These theories share a commonform. Each predicts that some motivational outcome will be determined by the summedproducts of individual evaluative elements and individual subjective probabilities thatthe associated evaluative elements will, in fact, be achieved by the aition being con-sidered.

There are, however, two difficulties associated with applying expectancy theory tonew venture creation. First, there is the question of how particular eiements-many ofwhich are actually negative in the organizational context-should be scaled. For exam-ple, take "job dissatisfaction" from Cromie's (1988) review of reasons for startins anew business. How might such an evaluative element be turned into the action ofcreating a new venture? Specifically, should it be counted as a negative (on the grounds,for example, that it represents a failure of the link between performance and ourcomes)?Or should it be counted as a positive (on the grounds thai it acts as a stimulus to trysomething else)? If it is the latter, what reason does the individual have to believe thatfailure of a performance-outcome link in one context means that there will be success ofthe same link in another context?

Portions of psychological exchange theory (Thibaut & Kelley, 1959) suggest analternative way to think of things like dissatisfaction with one's current job. Beginningwith the assumption that individuals seek to maximize their own outcomes

-in any

relationship, Thibaut and Kelley identify two standards against which such outcomesshould be judged. The first, called simply the comparison level (CL) is the average ofpast outcomes from similar circumstances. To the extent that one's present job is belowthe average set by one's past experience, job dissatisfaction will be the result. Thesecond standard, called the comparison level for alternatives (CLu,,) is the best currentlyavailable alternative to the present circumstances. A person whose current occupation;loutcomes exceed both CL and CLur, will be content, one whose outcomes are below CL,but above cl-u,,, will be unhappy, but dependent on the current job. The differencebetween people who consider job dissatisfaction as a fact of life, and those who use itas a reason to go out on their own may be as simple as whether "creating my ownbusiness" is one of the viable alternatives considered.

The second difficulty with applying exchange theory to new venture creation is morefundamental. To see the problem, assume that all elements can be scaled, and thatdespite the uncertainties inherent in new venture creation, the subjective probabilitiescan also be specified. Expectancy formulations then predict the resulting choice. Butthey do so by treating a highly desirable, but low probability outcome as equivalent toa much less desirable, but highly probable outcome. In a recent discussion of riskvchoice, however, Lopes (1987) makes a persuasive case against precisely this assump-t ion.

Traditional study of risky choice in experimental psychology has presented subjectswith rrva-alternative "gambles," that frequently take the form "would you preie. a1007o chance of winning $3,000, or an Sovo chance of winning $4,000?" Although thesecond choice has a higher expected utility ($3,200;, most subjects choose the firstchoice, suggesting that people are "risk-averse" (Kahneman & Tversky, 1979). suchfindings are exceedingly difficult to generalize to the creation ofa new venture, becausethe real world rarely presents just two choices. In a program of research designed toovercome this limitation, Lopes has presented subjects with six alternative "lotteries"with approximately equivalent expected values. After the participant chooses which

38 ENTREPRENEURSHIP THEORT ond PMCTICE

lottery to play, a random device indicates the ..winnings.,, One of the loftenes isriskless, arways producing rorn" puyoii, *hereas ,h;';'rh*ile conrain the possib.ity ofazero payoff' The lotteriet ut iho*n to^subjects u. pi.tu..r, with dollar amounts ofwinnings on the ordinate una nu,nu".. or ",i'"r."1:"ut#iluur" for each dolrar amounrshown on the abscissa. In addition io ,r,".ri.tt"., rru.iy,-in"re is a ..short shot,,, a"peaked" distribution, u .".tunguiu. Oi.r.tUutio;;;'ffi;j"t aistrtUution, and u ;;longshot" which has mostly ,".o oiiotu-payoff our.o-o.-iilJ'p."f"."n.es of risk_aversesubjects follow this ordlr in Oescenlirig fashion.From analvsilgl ugtrr trt. .*pi.*"i p.eferences and free-response expranations forchoices, Lopei (1987) h;;;;.r;"p;it*o-ru"to. th;t";;i.ky choice. The first facroris a personal preference tor r.cuity uolu, potential. Mathematically, security seekersweigh the worst outcomes more ireavily, ;h;;;; o"*"i", seekers weigh the bestoutcomes more heavily' In a departure from traditionui "*p.fiunc.y theory. Lopes arguestl" hese weights include uotrr ir,unger'in tt. .rii.""ipi"iiuilities and changes in thevartles of the ourcomes to which thiie probabiri;;;;';";i"'.,r.6. The secondfacror isaspiration level' and is defined bt 6; iituation- rn. r"iii"g provides informarion onwhat might be a reasonabre expect"til"; ,t. ,|".#; u"rr.rn"uriu" being considered iscouched in a conte-xt of other .nti..r uuuilable;'anJl".g., ,rr","gic goars can alter thetactics employed' Preference r- ,".uriiy versus potential is considered a personologicalvariable' whereas aspiration r.u"r ir rii'.rational; the rinur .i.r.y choice is thought io bedetermined by the interaction u"l*""r.in. two- once again, behavior relatei' to newventure creation is produced by the interaction u.r*""nloron uno environment.

Expectancy and UncertaintvIt may be no accident

3u,,.i!,:.":cy theories have been heavily appried within theorganization riterature (e.g., Loike & Latham, l9g0),;;t iess u.oaoly used in rheIiterature on new venture creation. The array of possibie et.*"nt. that could be valuedis more likely to be specifiable in an ffiiratronri "";;;;irh; ir is in an entrepreneuriarventure' After all' new venture creatio'-n is nothing ir not innovation, taking the unfore-seen with the foreseeable. Moreover, even if ttie elemeni, "ouro be specified, theirvalu's might not be.,tlose ex.pecled !r-rh.."r"u..t".r- nnoiinauy, compared to thereli'e certaintv of the organizational climate, the entreprenzurial climate provides fewclues to the probability e#maier iir"i ririrro ue attactre'J," *"t individual evaruativeelement. In the examination "r .n"i".,'", wet as in the ,iuov or process, the psycho_logical perspective incorporates both personal and situational variables.CONCLUSIONS

The study of new v:nqrr: creation began with some reasonable assumptions aboutthe psychologicar characteristics or "*t."p."neurs.,, Through the years, more and moreof these personolosical characte.irti"r"r,ui. been discarJ"f,^j.u""ted, or at the very.,?i,T;"llxlt;"jlx u"'n '"u'u."al"ii".ru"rv. ir," i"r,irii^ been a tendencv top,ortanr ;,o" i ur n" t*o',i.3llffi;,Ifi ij JH#[T:|#,!;:* : _:irc u m s tan c e 1 are i m -important; finance is importanti;;;;;;;. asency assisrance ,,lH?:XXlllTilT:'l"tj;these will, alone, create a new ventu.". Fo. that we need a person, in whose mind all ofthe possibilities come together, who believes that innovation is possible, and who has themotivation to persist until the job Jd*;. i.rron, process, and choice: for these we needa truly psychologicar perspeciiv. on n"*l"nture creation.

Wnter,199139

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i*ii,il.in.l"r";J]?lti; lhe^hu1gn choice: Individr,ii1.,reason. and order versus deindividuarion237-307'.iffi;, u;iil,i *11S,*rj #J'* (Eds ). 1vp6;a,; ;r;;:;^ on motivation, te6e. pp.

Kelly G. Shaver is professor of psychology at the College of William & Mury.Linda R' scott is a student at T. c. wilriams Schoor of Law, university of Richmond.

..^_ ,T":ujlrors thank Elizabeth J. Gatewood and Lversion of this paper. J' v4rewuo(l ano Lanny Herron for theirhelpfur comments on an earlier

\Mnter,199t

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