The Entrepreneurial Mind-

Set in Individuals: Cognition

and Ethics
 The Entrepreneurial Mind-Set
Entrepreneurial Mind-Set Who Are Entrepreneurs?
Describes the most common  Independent individuals,
characteristics associated with intensely committed and
successful entrepreneurs as well determined to persevere, who
as the elements associated with work very hard.
the “dark side” of  They are confident optimists
entrepreneurship. who strive for integrity.
 They burn with the
competitive desire to excel
and use failure as a learning
tool.

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 Entrepreneurial Cognition
Social
Cognition Cognition Entrepreneurial
Theory Cognition
The mental Posits that The knowledge
functions, processes knowledge structures that
(thoughts), and structures (mental people use to make
states of intelligent models of assessments,
humans—attention, cognitions) can be judgments, or
remembering, ordered to optimize decisions involving
producing and personal opportunity
understanding effectiveness within evaluation, venture
language, solving given situations. creation, and
problems, and growth.
making decisions.
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 Metacognitive Perspective
Cognitive Adaptability Metacognitive Model
The ability to be dynamic,  Describes the higher-order
flexible, and self-regulating in cognitive process that results
one’s cognitions given dynamic in the entrepreneur framing a
and uncertain task environments. task effectually, and thus why
and how a particular strategy
was included in a set of
alternative responses to the
decision task (metacognition).

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 Sources of Research on Entrepreneurs

Research and Speeches,

Direct
Popular Seminars and
Observation
Publications Presentations

The
Entrepreneurial
Mindset

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 Sources of Research on Entrepreneurs
Publications  Newsletters
 Technical and professional  Proceedings of conferences
journals  The Internet
 Textbooks on entrepreneurship Direct Observation of
 Books about entrepreneurship Practicing Entrepreneurs
 Biographies or autobiographies  Interviews
of entrepreneurs
 Surveys
 Compendiums about
entrepreneurs  Case Studies
 News periodicals Speeches, Seminars, and
 Venture periodicals Presentations by Practicing
Entrepreneurs
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 Characteristics of the Entrepreneurial
Mind-Set
 Determination and perseverance  Passion
 Drive to achieve  Independence
 Opportunity orientation  Team building
 Initiative and responsibility  Determination and
 Persistent problem solving perseverance
 Seeking feedback  Drive to achieve
 Internal locus of control  Opportunity orientation
 Tolerance for ambiguity  Initiative and responsibility
 Calculated risk taking  Persistent problem solving
 High energy level  Seeking feedback
 Creativity and innovativeness  Tolerance for ambiguity
7  Vision
 Outline of the Entrepreneurial
Organization

Imagination

Willingness
Flexibility to accept
risks

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 Characteristics Often Attributed to
Entrepreneurs
1. Confidence 11. Ability to influence others
2. Perseverance, determination 12. Ability to get along well with
3. Energy, diligence people
4. Resourcefulness 13. Initiative
5. Ability to take calculated 14. Flexibility
risks 15. Intelligence
6. Dynamism, leadership 16. Orientation to clear goals
7. Optimism 17. Positive response to
8. Need to achieve challenges
9. Versatility; knowledge of 18. Independence
product, market, machinery, 19. Responsiveness to
technology suggestions and criticism
9 10. Creativity 20. Time competence, efficiency
 Characteristics Often Attributed to
Entrepreneurs
21. Ability to make decisions 31. Courage
quickly 32. Imagination
22. Responsibility 33. Perceptiveness
23. Foresight 34. Toleration of ambiguity
24. Accuracy, thoroughness 35. Aggressiveness
25. Cooperativeness 36. Capacity for enjoyment
26. Profit orientation 37. Efficacy
27. Ability to learn from 38. Commitment
mistakes
39. Ability to trust workers
28. Sense of power
40. Sensitivity to others
29. Pleasant personality
41. Honesty, integrity
30. Egotism
10 42. Maturity, balance
Entrepreneurship Theory
Entrepreneurs cause entrepreneurship
 Entrepreneurship is a function of the entrepreneur:

 Entrepreneurship is characterized as the interaction of

skills related to inner control, planning and goal
setting, risk taking, innovation, reality perception, use
of feedback, decision-making, human relations, and
independence.
 Dealing with Failure:
The Grief Recovery Process
Loss Orientation Restoration Orientation
 Involves focusing on the  Involves both DISTRACT oneself from
thinking about the failure event and
particular loss to construct an being proactive towards secondary
account that explains why the causes of stress.
loss occurred.

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 The Entrepreneurial Experience
Entrepreneurs
 Create ventures much as an artist creates a painting.
 Are formed by the lived experience of venture creation.

Experiential Nature of Creating a Sustainable Enterprise

 Emergence of the opportunity
 Emergence of the venture
 End emergence of the entrepreneur

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 The Dark Side of Entrepreneurship
The Entrepreneur’s Confrontation with Risk
 Financial risk versus profit (return) motive varies in
entrepreneurs’ desire for wealth.
 Career risk—loss of employment security
 Family and social risk—competing commitments of work and
family
 Psychic risk—psychological impact of failure on the well-
being of entrepreneurs

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Typology of Entrepreneurial Styles
Level of Personal Financial Risk
 Entrepreneurs: Type A Personalities
The Entrepreneur’s Confrontation with Risk
 Chronic and severe sense of time urgency.
 Constant involvement in multiple projects subject to
deadlines.
 Neglect of all aspects of life except work.
 A tendency to take on excessive responsibility, combined
with the feeling that “Only I am capable of taking care of this
matter.”
 Explosiveness of speech and a tendency to speak faster than
most people.

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 Stress and the Entrepreneur
Entrepreneurial Stress
 The extent to which entrepreneurs’ work demands and
expectations exceed their abilities to perform as venture
initiators, they are likely to experience stress.

Sources of Entrepreneurial Stress

 Loneliness
 Immersion in business
 People problems
 Need to achieve

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 Dealing with Stress

Networking

Exercising Getting away

rigorously from it all

Communicating
Delegating
with employees

Finding satisfaction
outside the company
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 The Entrepreneurial Ego
Self-Destructive Characteristics
 Overbearing need for control
 Sense of distrust
 Overriding desire for success
 Unrealistic externalized optimism

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Entrepreneurial
Ethics
 Entrepreneurial Ethics
Ethics
 Provides the basic rules or parameters for conducting any
activity in an “acceptable” manner.
 Represents a set of principles prescribing a behavioral code
of what is good and right or bad and wrong
 Defines “situational” moral duty and obligations.

Sources of Ethical Dilemmas

 Pressure from inside and outside interests
 Changes in societal values, mores, and norms

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Classifying Decisions Using a
Conceptual Framework
 Entrepreneurial Ethics
Ethical rationalizations used to justify questionable conduct
involve believing that the activity:
 Is not “really” illegal or immoral.
 Is in the individual’s or the firm’s best interest.
 Will never be found out.
 Helps the firm so the firm will condone it

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 Types of Morally Questionable Acts
Type Direct Effect Examples

Nonrole Against the firm Expense account cheating

Embezzlement
Stealing supplies

Role failure Against the firm Superficial performance appraisal

Not confronting expense account cheating
Palming off a poor performer with inflated praise

Role distortion For the firm Bribery

Price fixing
Manipulating suppliers

Role assertion For the firm Investing in unethically governed countries

Using nuclear technology for energy generation
Not withdrawing product line in face of initial allegations of
24 inadequate safety
Overlap Between Moral Standards
and Legal Requirements

Ethical
Dilemmas
 Reasons for Unethical Behaviors Occur

Greed

A reliance on other social Distinctions between

institutions to convey and activities at work and
reinforce ethics activities at home

Survival Lack of a foundation

(bottom-line thinking) in ethics

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 Entrepreneurial Ethics
Complexity of Ethical Decisions
 Extended consequences
 Multiple alternatives
 Mixed outcomes
 Uncertain ethical consequences
 Personal implications

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 Entrepreneurial Ethics
Online Ethical Dilemmas in E-Commerce
 Continuing to obtain consumer trust.
 Protecting their business’s online reputation.
 Avoiding tactics that betray trust.
 Continuing to exhibit strong ethical responsibility.
 Establishing an ethical strategy.

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 Establishing a Strategy for an Ethical
Venture
Ethical Code of Conduct
 Is a statement of ethical practices or guidelines to which an
enterprise adheres.
 Are becoming more prevalent in industry.
 Are proving to be more meaningful in terms of external legal
and social development.
 Are more comprehensive in terms of their coverage.
 Are easier to implement in terms of the administrative
procedures used to enforce them.

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 “Always Do the Right Thing”
Reasons for management to adhere to a high moral code:
 It is good business because unethical practices have a
corrosive effect not only on the firm itself, but on free
markets and free trade which are fundamental to the survival
of the free enterprise system.
 Improving the moral climate of the firm will eventually win
back the public’s confidence in the firm.

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 Ethical Considerations of
Corporate Entrepreneurs
Organizational barriers that Promote ethical employee
invite unethical behaviors: behaviors by:
 Systems  Providing flexibility,
 Structures innovation, and support of
initiative and risk taking
 Policies and Procedures
 Removing barriers for
 Culture
entrepreneurial middle
 Strategic Direction managers
 People  Including an ethical
component to corporate
training
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 Ethical Challenges for Corporate
Entrepreneurship

Unethical
Consequences

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 Ethical Leadership by Entrepreneurs
The value system of an owner/entrepreneur is the key to
establishing an ethical organization.

A code of ethics provides a clear understanding of the need for:

▸ Ethical administrative decision-making
▸ Ethical behavior of employees
▸ Explicit rewards and punishments based on ethical behavior

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 Entrepreneurial Motivation
Entrepreneurial Motivation
The quest for new-venture creation as well as
the willingness to sustain that venture
▸ Personal characteristics, personal environment, business
environment, personal goal set (expectations), and the
existence of a viable business idea

Entrepreneurial Persistence
An entrepreneur’s choice to continue with an entrepreneurial
opportunity regardless of counterinfluences or other enticing
alternatives

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 Entrepreneurial Motivation
Entrepreneurial Motivation
The quest for new-venture creation as well as
the willingness to sustain that venture
▸ Personal characteristics, personal environment, business
environment, personal goal set (expectations), and the
existence of a viable business idea

Entrepreneurial Persistence
An entrepreneur’s choice to continue with an entrepreneurial
opportunity regardless of counterinfluences or other enticing
alternatives

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 Key Terms and Concepts
• career risk • failure
• code of conduct • family and social risk
• cognition • financial risk
• cognitive adaptability • grief recovery
• dark side of • metacognitive model
entrepreneurship • psychic risk
• entrepreneurial behavior • rationalizations
• Entrepreneurial cognition • risk
• entrepreneurial experience • role assertion
• entrepreneurial mind-set • role distortion
• entrepreneurial motivation • role failure
• entrepreneurial persistence • social cognition theory
• ethics • stress