The public perception of entrepreneurs today is almost legendary. They seem to seamlessly start up small businesses and make them grow and develop themselves almost overnight to big successes. (Beaver, 2005) This essay will briefly cover the differences and similarities between managers, business owners and entrepreneurs.
Differences and similarities between managers, owners and entrepreneurs Back in the 19th century being a businessman, in other words being an owner-manager, was not regarded a profession. These people were coordinators, arbitrators, innovators, interpreters of the market and risk-takers at the same time. The purpose of their activity ranged from interest from capital to profits for bearing the risk of operation. (Zaratiegui & Rabade, 2005) However they required ownership of over 50 per cent of the shared capital to have control over the business. (Burns, 2007)
From that early stage the traditional management as mentioned first in Henri Fayol’s General and Industrial Management in 1949 (in French, 1916) evolved which dominates our public perception still today. Here we notice a distinct separation between the owner, or the proprietor, of a business and the people those owners hire to get their business managed and administrated. (Fraja, 1996) Those managers are required to have certain capabilities, i.e. leading people and administrating operations, finance and resources. They are the ultimate authority in the organization and therefore responsible for the social, legal, environmental and ethical aspects of the company.
An entrepreneur is not exactly the latest form of performing business activities as Joseph A. Schumpeter identified entrepreneurial entities already in 19341, however, the term got increasingly popular by the end of the 20th century. People like Steve Jobs, Sir Richard Branson or Mark Zuckerberg are just some of many famous entrepreneurs. The Oxford English Dictionary defines an entrepreneur as “a person who attempts to profit by risk and initiative”. Therefore Gartner, et al. (1992) suggest that an entrepreneur is both a manager and an owner, with a willingness to accept risk, uncertainty and an eagerness to exploit change and profit from market niches. What is even more striking is that entrepreneurs have a certain 1
“A person, ‘a contractor’ who coordinates, organizes and supervises (posses managerial skills) an enterprise with exceptional moral qualities, perseverance, and knowledge of the world and society’s needs.”- Schumpeter, 1934
Similarities and differences between a manager, a business owner and an entrepreneur By Henry Amm set of skills that is superior to that of a manger in terms of productivity and profitability. Typical entrepreneurial capabilities comprise features such as investigating opportunities, believing in innovation, and strategic planning upon the latest developments on the market. (Piperopoulos, 2011) Any manager can behave in a more entrepreneurial way, if he or she is aware of the individual effectiveness.
This can ray out more confidence towards customers, investors or subordinates and therefore increase productivity and profitability. (Piperopoulos, 2011) Research has shown that entrepreneurs and managers might have different goals and working styles. (Stewart, et al., 1999) But even though everyone has different working preferences, the literature suggests that being an entrepreneur can be learned, especially regarding the way entrepreneurs work on tasks and complete them. What the typical manager can copy from an entrepreneur is his personal organization and interpersonal interaction. (Piperopoulos, 2011)
Burns (2007) notes that owner-managers, entrepreneurs and managers can be distinguished by their character traits and the type of business they run. An owner-manager typically has a high need for independence and achievement and an ability to live with uncertainty and measured risks. Therefore he often runs a lifestyle firm that is based on trade or craft which, however, will not grow to any considerable size. The entrepreneur in turn is opportunistic, innovative, self-confident and acts proactive and decisive. He is highly self-motivated by his vision and is therefore willing to take even greater risks and can live with a high uncertainty.
That is why the entrepreneur has a growth firm and is pursuing growth and personal wealth. Lastly the manager is administrating, or in other words managing, an entity that does not belong to him. His ‘purpose’ is to build up the organisation, by means that are similar to larger firms. (Burns, 2007) However there are some exceptions from that generalization: An owner-manager of course can have a growing business, while an entrepreneur could manage a business he owns together with a business associate and therefore has not complete control over the capital. (Burns, 2007)
As Fraja (1996) suggests every firm can be assigned to either one of the following types: Either it is an entrepreneurial firm, where the owner-manager or entrepreneur is in exclusive control, organizes production, borrows funds and retains any residual returns from his work. Or it is a managerial firm, where the individual that has the right to residual returns remains outside the company and the individual that has the right of control is hired from the owner.
Similarities and differences between a manager, a business owner and an entrepreneur By Henry Amm Modern approaches like ‘corporate entrepreneurship’ try to overcome those boundaries by incorporating advantages of entrepreneurship into common management. Companies try to facilitate diversification with internal development workshops. That makes activities necessary, in areas that are usually only loosely related to the current ‘domain’ of competence of the company. That is to engage innovation like you have it with a start-up company, but within an established organization. (Burgelmann, 1983)
Conclusion Exceptions prove the rule; mangers, owners and entrepreneurs can be distinguished not only by their character traits but they are also more likely to lead an organization that is typical for their respective role. Modern organizations try to incorporate selected features of entrepreneurship to be more competitive. It seems like those terms still are about to change, or maybe always will need adaption to our contemporary view onto management, ownership and entrepreneurship.
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