A Literature Review of Sociology and Entrepreneurship: The Development of an Entrepreneur
Introduction
This literature review is an attempt to gain better knowledge on the development process of the entrepreneur. According to two authors referenced from a study done by (Reynolds) “Entrepreneurship occurs at significantly higher rates than at any time in the last 100 years”. With this being said, I wanted to figure out what awakens the entrepreneurial mindset of individuals in society. Mentioned in a study done by Ruef (2010) a total of 4% of all adults which is approximately 1 out of 25 adults are starting up their own firm at any given time. Surveys show that there are many influencers in society that give individuals the awareness of attaining financial success on their own terms which can be broken down into three specific categories according to Ruef (2015). The three categories are autonomy seekers, Innovators, and organizers. All of which play big roles in the development of entrepreneurs in their start-up process. The start-up process is the process in which the entrepreneur is planning and organizing their business venture.
Definition of an Entrepreneur
An entrepreneur is an individual who organizes and runs their own business with the awareness of the financial risk it will take to make a substantial income. According to Ruef which is also mentioned in the introduction, an entrepreneur can be described in three ways, Autonomy seekers, innovators, and organizers (2015). Entrepreneurs are those who can identify opportunity through economic development and innovate ideas that create a demand that businesses will need to succeed.
The Awakening of the Entrepreneur Mindset
Developmental Process and Influential Forces
In a study done by Alexander Ebner, he conducted research on entrepreneurship and how its affected by economic development. The study was conducted by evaluating the perspective of of institutional content and examining the aspects of relations and leadership in the community. Both of which are relevant to the organizational and technological dimensions of innovation, which also coordinates as entrepreneurial functions (Ebner 2005). In the examinations of this the study overt the development of the entrepreneur much appreciation is given to economist Joseph Schumpeter and his written works on “Schumpeterian Entrepreneurship”. Schumpeterian Entrepreneurship is the knowledge of individuals being able to exploit market opportunities through technical or organizational innovation. Research from the sociological economic perspective of this study finds that efforts in theorizing entrepreneurship in economic development is relevant to the development of the entrepreneur and is also influenced in institutions. Overall this study states that innovation and organizations are heavily influenced by economic development in communities. Ebner’s study is relevant to figuring out the development of the entrepreneur because it discusses how institutions and economic development influence how entrepreneurs are created based on demand from already established businesses and organizations.
In relevance to Ebner (2010), a previous study towards the Sociology of Entrepreneurship was conducted focusing less on the supply perspective and more on the demand perspective of entrepreneurial development. Patricia Thornton, a Sociology and Entrepreneurship professor at the University of Texas decided to conduct a study on what creates the entrepreneur as a whole. Thornton’s research revolved around the influence of firms, markets, and how, where, and why new enterprises were created (1999). The study showed that the development of entrepreneurs predominately occurs in towns and small cities that are growing rapidly. According to Thornton (1999) her research shows that evidence makes it clear that the entrepreneurial lifestyle is a mindset that only 4% of all adults develop. This statistic was also mentioned in the study done by Ruef (2010) who I mentioned in the introduction in regards to adults starting their own businesses. The results of her study show that with economic development in society innovation and organizations rise to meet the demand of established business mostly in rapidly growing areas, same as shown in Ebner’s Study.
Clusters and Entrepreneurial Development
In clear correlation to Thornton’s study, Hector O. Rocha gathered research on The Role of Clusters and if it influences the development of entrepreneurs. Thornton’s study had results stating that entrepreneurial development was influenced by rapidly growing cities and towns (1999), Therefore, to add to her findings; Rocha’s study goes more in depth about the role that clusters play in entrepreneurial development. The study on clusters were divided into three topics, including entrepreneurial development, clusters and development, and clusters and entrepreneurship. According to Rocha, the results show that entrepreneurship is positively associated with economic growth and development (2004). Based on his findings, results show that its necessary to say that entrepreneurship influences positive change in the economic and social structure of the economy (Rocha 2004). Though (Thornton 1999) and (Ebner 2010) suggest that economic development influences entrepreneurial development; Rocha’s study based on clusters show that its nearly impossible to create generalizations towards the entrepreneurial development based on the impact of clusters. Positive results were represented in his findings, but limitations were also a factor based on different levels of analysis of rapidly growing towns and cities. This study appears to be credible when it comes to the facts the were mentioned in his study which were based on previous studies directed at his particular topic, but what weakened his study was that some of his findings were based more on his personal opinion. For example, a quote that devalues the study states “Due to conceptual and methodological constraints, it (seems) that” (Rocha 2004). This quote, from the reader’s perspective, seems like he took an educated guess on this particular topic. Instead he could’ve made it more factual by stating that there was no evidence that supported one or more sub topics in his study.
Sociology and Entrepreneurship
Based on the previously reviewed studies, it can be concluded that entrepreneurship is the process in which individuals can identify opportunities through economic development and innovate ideas through those who’ve already created businesses. This can result in new business start-ups which serve the demand for already existing businesses. The Sociology aspect comes into play by being able to recognize certain groups and how they develop, maintain, and take part in economic stability through sociological concepts and theories.
A study done by Martin Ruef describes the entrepreneur in three ways also mentioned in the introduction being Innovators, Autonomy seekers, and Organizers. He wanted to give the reader an understanding of sociology and entrepreneurship development. In his written works, his studies show how analysis from statistics and previous studies link mechanisms of the three views to entrepreneurial outcomes on different levels (Ruef 2015). Ruef’s written works also expands on how social networks and relationships help innovate new business ideas which encourage personal freedom and the receiving of support for organizing ideas. The premise of the works written by Ruef (2015) is to show statistics and how successful business ventures were created through social networks which sparked ideas to meet what is in demand in economic development.
Social Networks and Entrepreneurship
In the research studies done by Arent Greve and Janet W. Salaff, they based their study globally on social networking activities of entrepreneurs. The reasoning of this study was to find if networking influenced entrepreneurial development. What the study conducted by Greve and Salaff (2003) showed was that entrepreneurs access people in their social networks to discuss ideas and how to start and successfully run their own businesses. Their results showed that their studies varied based on a few categories. The categories revealed in their research was by analyzing number of partners in developmental business meetings, and the time they spent networking. According to Greve and Salaff (2003) “Entrepreneurs who network and talk with more people for advice during the planning phases of business development are much more successful than those who spend less time and try to work by themselves.” Overall their research results showed that all countries have very similar networking patterns for business ventures. The only difference between countries and networking patterns were the size of discussion groups, times spent meeting, and some countires such as India and Korea didn’t have women present in the business meetings.
Similar to the study done by Greve and Salaff (2003), Martin Ruef has written works over his study on “entrepreneurial groups”. The reasoning behind his study of entrepreneurial groups was to figure out if individuals or groups had more success with start-ups and the impact on economic development. Ruef’s Study revealed that entrepreneurial groups are the leading force behind entrepreneurial start-ups. His written works eradicate the myth of individuals single handedly enhancing market places. Ruef (2010) Provides theoretical frameworks for the understanding of activities and their outcomes based towards entrepreneurial groups. Ruef’s research results show that groups of entrepreneurs who do business and organize ideas together excel much faster and at a higher rate than lone entrepreneurs. This study’s strength is the research done showing how groups are able to attain success much faster and easier through the social cohesion theory.
In terms of the social cohesion theory, research done by Milan Zafirovski shows that her study is very relatable to Ruef (2010) Study on entrepreneurial groups. They both provide results from their studies that as a group, entrepreneurial endeavors are much more likely to be successful than single entrepreneurs. In Zafirovski’s study, she took an unconventional approach. She uses the view points of of conventional economic wisdom. Her study results show that social circumstances influence the development of entrepreneurs. According to Zafirovski “Entrepreneurship presses an eminently social character and is subject to the operation of definite societal processes” (2010). The main purpose of Zafirovski’s research was to provide a general understanding that as an entrepreneur, business endeavors will be based towards niche markets that through the influence of social sciences and social networks will be able to be identified. Through social sciences and social circumstances entrepreneurs are able to identify opportunity through each other to build businesses that meet the demands of economic developments. (Zafirovski 2010) and (Ebner 2010) had very similar results that were found in their research towards entrepreneurs being able to identify what’s in demand.
Social Sciences Entrepreneurship Correlation
In a study done by sociologist Richard Swedberg, he proposed an argument stating that social sciences are under looked in the business relam of society and social institutions (Swedberg 2000). Though previous studies examined based towards his research show that social sciences are discredited in business, recent studies including his own show that social sciences are experiencing a sustained increase in entrepreneurship (Swedberg 2000). This is a result of the interest of economist and sociologist in institutions. Even with the increase of social sciences implemented into the business realm of society, Swedberg mentions that there is still a large handful of business professors who feel social sciences have no relevancy to entrepreneurship. Therefore, they argue that it shouldn’t be taught along side entrepreneurship or business in general. Business professors who are critics of social sciences believe that due to the definition of “how” an entrepreneur is formed makes their argument credible. Two critics mentioned in Swedberg’s study state that “Entrepreneurial development is formed by either individual on their own or through organizations, pursue opportunities without regard to resources they already control” (Swedberg 2000).
The critics in Swedberg (2000) study also believe that individuals can be taught how to identify opportunities with out the influence of sociological concepts. Swedberg’s argument is that social sciences relevance to the business realm of society is mistaken. He argues that even though you can train someone to detect opportunity, through insititutions, social sciences still play a major part in entrepreneurship development (Swedberg 2000). This is because individuals must be able to understand, identify, and find target groups of people for their entrepreneurial endeavors. As social sciences are the scientific studies of human society and social relationships, its crucial as an entrepreneur to have an understanding of the concepts and terminologies that are taught in social sciences in institutions. According to Swedberg, with the understanding of human society and social relationships, an entrepreneur is destined to have much more success than one who doesn’t understand social sciences. The strength of his argument far exceeded the possible weakness’s, because his arguments was based on facts correlating the basic building blocks of building a business and how social sciences are implemented into the process of entrepreneurial ventures.
Sociology of Entrepreneurship and Culture
An International Perspective
In the research conducted by Kathleen Eisenhardt and Naushad Forbes, they took an international approach to understand the development of entrepreneurs culturally. Their studies were based out of Japan, Great Britain, The United States, and India. This study was done to examine capital incubator companies, social and technical volatility, and supportive culture (Eisenhardt and Forbes). The mentioned topics were three most common topics that supported their study which resulted in them finding them there were high rates of entrepreneurial endeavors based around technology around the world. This study also revealed that technology based entrepreneurs were the ones who had the most influence towards innovation for pre-entrepreneurs. The moral of (Eisenhardt and Forbes) study was to show that even though start-ups start out small, they have a much bigger advantage over their larger competition. This is because start ups are able to identify new niche markets that are too small for larger companies more established companies to notice. This study is very relevant to the study done by Zafirovsk (2010) because both speak on how niche markets need to be identified which can be easily identified with an understanding of social sciences.
Ethnic Entrepreneurship
In this study focused on entrepreneurship and ethnicity, Gamal Ibrahim and Vaughan Galt based their research on previous research done on ethnicity and business ventures. Their study shows that new institutional and neo-classical economists fail to provide an adequate explanation of differences between ethnic groups and rates of forming businesses (Ibrahim and Galt 2011). Previous studies mentioned by Ibrahim and Galt state that much explanation in terms of culture and entrepreneurship were because of pre-determined exo and endo-geneous factors. Endo-geneous factors are individuals whom are dependent on outside variables to determine an outcome. Exo-geneous factors are individuals whom are not dependent, and not affected by outside variables. (Ibrahim and Galt 2011) find that non-white entrepreneurs are classified as endo-geneous because they typically rely on outside factors to determine their outcome with their entrepreneurial endeavors. White entrepreneurs are classified as exo-geneous because they typically don’t depend on outside factors to determine their outcome and studies show they’re more independent in terms of relying on others. This study reveals that minority groups who pursue entrepreneurial ventures try and identify what lacks in the community. Stated by Ibrahim and Galt (2011) “Whatever lacks in the economic development, minorities identify as a business opportunity.”.
In a study done on the cultural perspectives of entrepreneurial development, entrepreneurs are seen as outliers of society engaging with creative forces that cause innovation and new ideas for technology. Though, this is an accurate description of an entrepreneur the cultural aspect is typically over looked according to (Daines et al. 2008). There study on culture and entrepreneurship shows that racial groups have different values than each other and based on their environment and social circumstances they identify opportunity differently.
The main premise of this study is to show how racial groups use sub categories of social capital and human capital to their advantage to excel in entrepreneurial ventures. Bonding and bridging social capital is at play when determining the difference between racial groups. Bonding social capital is what forms amongst groups of people who are alike and have similar values and morals, this is a crucial factor for “getting by” according to (Daines et al. 2008). Bridging social capital is what forms when people who are unalike and have different values, according to (Daines et al. 2008) this is a crucial step for “getting ahead” as an entrepreneur. This study reveals that minority groups rely on social capital in terms on entrepreneurial success and lean more towards the bonding characteristic. Evidence shows that minority groups rely more on each other for success sticking to those who have similar interests and values. Non-white entrepreneurs typically use human capital and lean more towards the bridging characteristic. According to (Daines et al. 2008) it’s a societal norm for whites to own business and have the “boss” roll. Therefore, minorities have to rely on their social networks to deter oppression and the thought that minorities can’t be successful in a society dominated by white privilege.
Urban and Local Influence
Research based on entrepreneurship development is typically reviewed through local areas for formations of new businesses. This study done by (Glaeser, Rosenthal, and Strange 2009) show that local environments influence entrepreneurial endeavors such as how individuals make choices and determine what’s in demand. Similar to Ebner (2010), both determine how individuals are influenced to create new firms based on local demands. This study also relates with work done by (Daines et al. 2008) because both studies examine how urban and local areas economic development influence the awakening of the entrepreneurial mindset. According to (Glaeser, Rosenthal, and Strange 2009) their findings show that there are hidden agendas created during economic developments that future entrepreneurs will be able to identify, creating opportunity that has a demand for existing businesses.
The Entrepreneur Personality
In a study done by Paul D. Reynolds, he attempts to provide an understanding of the personality of entrepreneurs and the development process. In his research he finds that entrepreneurs are competitive and understand that to make ends meet they must hustle. According to (Reynolds) Entrepreneurs are very quick to identify opportunity through the economic development, impacts of society, and attention to societal characteristics. Reynolds study reveals that those who are able to fully understand the key characteristics of society and create opportunity through social networks have the mindset of the elite. The elite is a very small percentage of people whom have the most power by building empires based around the needs and demand of economic developments. Reynolds study on the personality of entrepreneurs shows that the most successful entrepreneurs are very humble and usually seize opportunity through ways that help other people succeed.
According to research done by (Korunka, Frank, and Lueger 2003), a study was conducted on the personality of entrepreneurs in relevance to research done by (Reynolds). This study was conducted to discover what variables influence the personalities and awareness of entrepreneurs. The three common variables revealed from their findings were the influence of the environment, resources, and the start-up process. Their study was conducted by creating a questionnaire to measure the configuration of business owners’ personalities. Included in the questionnaire were topics on personality traits, environment, and organizing events and activities. Though the entrepreneur mindset is common amongst entrepreneurs, giving people the ability to dive into the unknown knowingly having many risks involved (Korunka, Frank, and Lueger 2003), many still differed in personalities according to their questionnaire. Their results revealed that not all business owners who lacked in public speaking skills or event organizing were just as successful as those who excelled in those particular areas. Their study found that, where business owners lack specific abilities, they hire people who excel in those areas to make up for it.
David Goss, a sociology and entrepreneurship professor conducted a study referring to work done by Joseph Schumpeter. Goss (2005) states that Joseph Schumpeter’s work has been considered very influential towards the entrepreneurial development. This statement was also referenced in studies done by Swedberg (2000). Though Schumpeter’s work plays a major role in entrepreneur development, his insights on sociology and entrepreneurship get very little attention. According to Goss, his research shows on Schumpeter’s work reveals that his writing show that true entrepreneurs have a lot of mental strength and will power which help them with social control and being able to face consequences with them having little to no affect on their well being.
Sociology and Entrepreneurship Developmental Conclusion
Based on my research on Sociology and Entrepreneurial Development, my findings conclude that sociology as a social science is positively associated with the development of an entrepreneur. Through all of the articles reviewed, each individual article had some form aspect of social science implications in their studies contributing to entrepreneurial development. Though, what was recognized was that social sciences were lightly used when explaining the implications of them in multiple articles. This literature review concludes that entrepreneur development is solely and directly correlated with innovation during economic development processes through social networks. Through Social Networks individuals are able to figure out the demands of society through sociological implications. Many factors such as the environment, resources, and social networks influence how individuals seize opportunities. The main goal for any entrepreneur according to research already done should be to remain humble and to not venture alone(Reynolds). Also in appreciation to the written works of Ruef(2010) entrepreneurs excel much faster and achieve much more success working in groups. Therefore, if an entrepreneur has an idea the best thing they can do in their start-up process is to create a social network of individuals on the same mission as them.
Future Implications
For future studies, it would be very beneficial to learn if entrepreneurial behaviors can be recognized in child hood. None of the articles, and very little research has been done on the entrepreneurial developments in childhood. Due to technology advancing rapidly, the younger generations have much more knowledge on how to use applications and devices better than adults. Studies on how new technology is creating opportunity for younger generations and how the economy is affected by young entrepreneurs would help fill in some of the grey areas in regards to future entrepreneur development.
References
- Daines, Sharon M., Jinhee Lee, Kathryn Stafford, Ramona Kay, and Zachary Heck. 2008. “Journal of Developmental Entrepreneurship.” The Effects of Ethnicity, Families, and Culture on Entrepreneurial Experience: An Extension of Sustainable Family Business Theory 13(3):229–268.
- Ebner, Alexander. 2005 “Entrepreneurship and economic development: From classical political economy to economic sociology”, Journal of Economic Studies, Vol. 32 Iss: 3, pp.256 – 274
- Eisenhardt, Kathleen, and Naushad Forbes. N.d. “Technical Entrepreneurship.” An International Perspective. 19(4):31–37.
- Glaeser, Edward L., Stuart S. Rosenthal, and William C. Strange. 2009. “Urban Economics and Entrepreneurship.” 61(1):1–14.
- Goss, David. 2005. “Stumpers Legacy. Interaction and Emotions In The Sociology of Entrepreneurship.” Entrepreneurship Theory and Practice 29(2):205.
- Greve, Arent, and Janet W. Salaff. 2003. “Social Networks and Entrepreneurship.” 28(1):1–22.
- Ibrahim, Gamal, and Vaughan Galt. 2011. “Explaining Ethnic Entrepreneurship: An Evolutionary Economics Approach.” International Ethnic Entrepreneurship 20(6):607–613.
- Korunka, Christian, Hermann Frank, and Manfred Lueger. 2003. “The Entrepreneurial Personality In The Context of Resources, Environment, and The Start Up Process: A Configurational Approach.” 29(1):23–42.
- Reynolds, Paul D. N.d. “Sociology and Entrepreneurship Concepts and Contributions.” 16(2):47–70.
- Rocha, H.O. Small Bus Econ (2004) 23: 363. doi:10.1007/s11187-004-3991-8
- Ruef, Martin. 2010. The Entrepreneurial Group: Social Identities, Relations, and Collective Action. Princeton University Press.
- Ruef, Martin. 2015. Sociology of Entrepreneurship. Online: John Wiley & Sons Inc.
- Rocha, Hector O. 2004. “Entrepreneurship and Development: The Role of Cluster.” Small Business Economics 23(5):363–400.
- Swedberg, Richard. 2000. The Social Science View of Entrepreneurship: Introductions and Practical Applications. Oxford Ll Press.
- Thornton, Patricia. 1999. “The Sociology of Entrepreneurship.” Annual Review of Sociology 25:19–46.
- Zafirovski, Milan. 2010. “Probing Into The Social Layers of Entrepreneurship.” Outlines of The Sociology Enterprise 11(4):351–371.
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