Differentiating Small Business Owners from Entrepreneurs

Topics: Business, Entrepreneurship, Small business Pages: 12 (3622 words) Published: February 4, 2011
Differentiating Entrepreneurs from Small Business Owners: A Conceptualization ∗ James W. Carland1, Frank Hoy2, William R. Boulton3 and Jo Ann C. Carland4 1

Western Carolina University University of Georgia University of Georgia

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Western Carolina University

Abstract The literature of small business and entrepreneurship is explored. It is established that, although there is an overlap between entrepreneurial firms and small business firms, they are different entities. Using the 1934 work of Schumpeter and recognizing the additions to the field of current writers, a conceptual framework is established for the differentiation of entrepreneurs from small business owners.

Schumpeter (1934) was among the first to identify the entrepreneur as an entity worthy of study, distinct from business owners and managers. He described entrepreneurs as individuals whose function was to carry out new combinations of means of production. To Schumpeter, this function was fundamental to economic development. Entrepreneurs, therefore, warranted study independent of capitalists and business managers. Today there continues to be an implicit assumption that the entrepreneur contributes disproportionately to the economy of a nation, yet little has been done to isolate this individual for further analysis. Extending the theory of Schumpeter, who argued that an entrepreneur was distinguishable both by type and by conduct, two conceptualizations are proposed in this paper: one for differentiating entrepreneurs from small business owner/managers and the second for differentiating entrepreneurial ventures from small businesses.

Entrepreneurship: the Contribution
Because the definition of entrepreneurship denotes the creation of some combination that did not previously exist, entrepreneurship often is equated with small business ownership and management. The small business sector has received ∗

Originally published in Academy of Management Journal, 1984, 9(2):354–359. Reprinted by permission of Academy of Management Journal via the Copyright Clearance Center.

74 James W. Carland, Frank Hoy, William R. Boulton and Jo Ann C. Carland

attention in the economic and management literature because of its significance to the economy. The Small Business Administration (U.S. Government Printing Office, 1982) has compiled a fist of statistics that dramatically demonstrate the impact of small business on the nation’s economy: 1. There are 14.7 million businesses in the United States, of which 3.2 million are farms. 2. Approximately 99.7 percent of these businesses are considered small by the SBA’s size standards for loan applicants. 3. The small businesses identified above account for: 38 percent of the gross national product; 44 percent of the gross business product; and 47 percent of total U.S. business employment. 4. The small business sector identified above accounted for the vast majority of the net new jobs created by business between 1969 and 1976. Although there is no uniform definition of a small firm, the statistics above relate to businesses that fall within SBA guidelines as being small. The Small Business Act states that “a small business concern shall be deemed to be one which is independently owned and operated and which is not dominant in its field of operation” (U.S. Small Business Administration, 1978, p. 121.1). As the SBA statistics demonstrate, small business research is justified because of sheer numbers. It must be noted that small firms are treated as a separate sector, not because they are cohesive and homogeneous, but because there are certain common management limitations due to extremely limited resources as compared with the “deep pockets” of resources of larger corporate organizations. Research often is directed toward the implications of public policy developments or the impact of environmental variables on the small business sector (Chilton & Weidenbaum, 1982; Goodman, 1981; Legler & Hoy, 1982;...
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