Critically Evaluate the Role Psychological Theories Play in Our Understanding of Entrepreneurship

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Critically evaluate the role psychological theories play in our understanding of entrepreneurial study: Psychological theory has been used to better understand an individual’s willingness and ability to become a successful entrepreneur in society. It is widely recognised that entrepreneurs are a major source of economic growth and financial benefit for society; as such it is useful to understand the psychological traits and drivers behind a successful entrepreneur to encourage more people to become entrepreneurs for the benefit of society. There are two major psychological theories that are useful and also criticised in the understanding of entrepreneurship; these are the trait approach and the cognitive approach. The trait approach focuses on personality attributes, which are consistent patterns in the way people think, act and feel. It is widely agreed that these traits are the building blocks of personality. This psychological research is useful to understand the motivational characteristics that encourage people to become entrepreneurs and also it helps to understand entrepreneur’s behaviour. The trait approach can answer fundamental questions including: “who are most likely to succeed as entrepreneurs”. Whilst Trait is useful, it has been criticised for the lack of consensus among researchers; surrounding a fixed set of clear cut differences in personality traits between entrepreneurs and non-entrepreneurs. For this reason the validity of the trait approach has been questioned; despite criticisms, research into the correlation between entrepreneurs and personality traits are continuously being researched. A particular trait that has been explored to better understand entrepreneurship has been extensively studied by David McClelland; this trait has been termed ‘Achievement Motivation’. This term has been singled out as the most prevalent theory of entrepreneurship; it roughly translates as an individual’s desire to do well for the sake of personal accomplishment, the desire to excel and solve problems personally. Individuals that have a higher need for achievement are more suited to an entrepreneurial role. According to McClelland achievement motivation is a motivational factor that encourages individuals to pursue an opportunity by setting goals and accepting a degree of risk in order to succeed. Understanding this personality trait, and what drives entrepreneurial behaviour, can be used as an instrument by financers to ‘pick winners’. By better understanding what drives an entrepreneur, governments can encourage individuals to seek opportunities and also encourage managers to give individuals that possess this trait opportunities to experiment and gain self-fulfilment. Richard Branson is a good example of how achievement motivation can inspire and motivate new ventures: when he started ‘student magazine’ at the age of 16, he declared ‘I was partly driven by a desire to prove myself, it didn’t matter that we had no financial backing’. Those individuals that are achievement motivated are not motivated by money, although it can be used to demonstrate how much achievement has been made. Whilst AM is considered the most prevalent theory of entrepreneurship, it is not without criticism. Low and MacMillan (1988) found that the need for achievement was not unique to entrepreneurs; they found that results were inconsistent and one reason for this was culture, which plays an important role in the level of achievement motivation. Chell et al (1991) found that there were lingering doubts surrounding the power of the achievement motivation principle, as such the validity of this term to aid entrepreneurial research is still being questioned. Another personality trait that has been identified to support entrepreneurial behaviour is ‘locus of control’. This trait can be used to explain why some individuals are able to spot opportunities in the market place whilst others can’t. Internal Locus of control is an individual’s...
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