CHAPTER ONE

INTRODUCTION

This phenomenological study will seek to understand the process that adults experience when they become entrepreneurs by pursuing business opportunities. This chapter presents the background of the problem, problem statement, research questions, and conceptual framework for the study. Significance of the study, limitations of the study, and definition of terms are also addressed.

Background to the Problem

“New business creation is a fundamental indicator of entrepreneurial activity in the U.S. economy. The self sufficiency and independence that lead individuals to create new businesses significantly affects economic growth, innovation and job creation” (Reynolds, 2002 p.6). As capitalism has emerged as the Western world's dominant economic system, entrepreneurial activity has become the major source of upward social mobility and the primary source of job creation. Entrepreneurial activity is the major source of economic enhancement and the first cause of innovation in business (Bygrave, 2004). Five hundred million people are participating in entrepreneurial activity worldwide (Reynolds, 2002). “firm startup effort” are undertaken by half of all adults in the United States (U.S.) during their work careers, and one in eight working adults in the U.S. started a new business in 2001 (Reynolds, 2002). “firm startup effort” is

Entrepreneurial activity is a means of accomplishing personal goals and reaching self-actualization. The typical Monday through Friday work schedule of the ‘60s and ‘70s is no longer true for a large segment of today’s workforce. Employees are increasingly complaining that the line between work and life has become blurred, creating personal conflicts and stress (Brett & Stroh, 2003). Entrepreneurship provides the possibility of personal achievement for those who feel disengaged in their jobs and who don’t find a sense of purpose in their work. Starting a business gives people the chance of reaching more exciting and creative ways of life. Entrepreneurship is not only healthy for the economic system, but also provides an opportunity for many people to achieve a better quality of life.

Currently, 61% of US college and universities offer at least one course on entrepreneurship (Bygrave, 2004). Many formal educational programs focus on U.S. teaching techniques and models about how the entrepreneurial process should be managed.. However, these programs aim to help people after they have already made the decision to start a business or are evaluating the possibility of starting a business.

Problem Statement

Despite the importance assigned to the need to foster entrepreneurship, only 6% of the U.S. population actively participates in entrepreneurial activity (Reynolds, 2002). Most of the remaining 94% are traditional workers who expect to find and maintain an employer who will pay them for their labor.

Literature is abundant on what successful entrepreneurs do cite, which social conditions create more business cite, and which entrepreneurial activities are highly correlated with business growth cite. Yet we know little about the process that occurs just before the idea to undertake a business comes to mind. Research to help us understand how people decide to become entrepreneurs, what motivates them, and how they perceive and describe this process is scant. Little scholarly research is available to explain the nature of the decision individuals make to pursue unconventional ideas. Why would somebody leave a secure job to start a new enterprise?

Purpose Statement

The purpose of this study is to understand the process that triggers a person’s decision to become an entrepreneur. The study aims to understand what personal transformations, if any, are experienced before adults modify their priorities to pursue a business opportunity.

Research Questions

1. How do entrepreneurs describe the process of becoming entrepreneurs?

2. How do entrepreneurs describe the process of identifying an opportunity?

3. How do entrepreneurs describe the moment when they become aware of the desire to start a business?

4. How do entrepreneurs perceive themselves before and after becoming entrepreneurs?

Conceptual Framework

This study is informed by various concepts such as creative destruction cite, structural determinism cite, and perspective transformation cite. These concepts are used, related, and analyzed from the constructivist theory. A constructivist perspective is congruent with much of adult learning theory (Merriam & Caffarella, 1999). “Constructivists posit that learning is a process of constructing meaning. Drawing from Piaget, learning as an individual activity, involves a progressive adaptation of [an] individual’s cognitive schemes to the physical environment” (Towmey, 2005.p.11). This study presents the change of perspective to become an entrepreneur as an individual’s progressive adaptation to the physical environment, performed spontaneously when becoming an entrepreneur and triggered possibly by formal education.

Creative destruction

Entrepreneurs are conceptualized as creative destructors (Schumpeter, 1950). They are people who rearrange the current allocation of resources to create new, productive relations. These new relations produce outcomes desired by the entrepreneurs and imply a progressive adaptation to the physical environment. It is in while searching for these new outcomes that entrepreneur motivates themselves to pursue an opportunity. The entrepreneur’s behavior reflects a kind of person willing to change priorities like career development and financial security to pursue an identified opportunity (Drucker, 1970).

Entrepreneurship is a function of different factors like opportunities, motivation, and resources (Aldrich & Zimmer, 1985). However, the perception of an opportunity rather than the resource controlled drives the entrepreneurship process (Gartner, 1985). Entrepreneurs don’t have the resources; they combine disconnected resources to create new, more valuable conditions (Schumpeter, 1950). Through this process, entrepreneurs rearrange the order of the economic system and reform it.

Structural Determinism

Opportunities are interpretations that adults make about the world that they are living. Opportunities are meaningful to the adult not because of the objective conditions of the opportunity, but because of a particular interaction between the adult’s previous experience and the environment in which he or she is living. A business opportunity is a subjective idea that someone has concerning the benefits that it (the opportunity) can bring to oneself or to others through the deployment of specific actions that can capture the opportunity. This subjective idea of the opportunity is a mental construction that the person creates. Like all mental constructions, it’s an internal process that depends more on the person observing the phenomenon than on the “objectives” characteristics of the opportunity. Entrepreneurs, as living systems, are structured and determined systems, and as such deal, nothing external to them can specify what happens to them (Maturana, 1970, 1975). Therefore, the opportunity does not exist outside the head of the entrepreneur and should be possible to develop the ability of observing opportunities. Inquiring about how the internal process of perceive an idea happen could help to facilitate, by formal education, the process of becoming entrepreneur.

Perspective Transformation

The decision to change career and/or financial security to pursue an opportunity represents a big transformation on the adult’s life. This transformation can be understood as a perspective transformation (Mezirow, 1999). Perspective transformation is the process of becoming critical about the way that we perceive, understand, and feel about the world (Mezirow, 1990). This transformative process can be provoked by a single dramatic event, a series of almost unnoticed cumulative events, a deliberate conscious effort to make change in one’s life, or by the natural developmental progression of maturing. This research will seek to understand how adult entrepreneurs describe these events trying to discover if they are/were aware of this process.

Definition of Terms

Structural determinism. Structural determinism is, according to system theory, the property of the autopietic[1] (Maturana & Varela, 1970) system such as any action or influence coming from outside that does not have a direct or mechanical effect over the system, but is always modified or mediated by the organism.

Entrepreneur by opportunity. Somebody who starts a business even though he/she is employed and does not have a present or future financial crisis pushing him/her to start the business.

Entrepreneur by necessity. Somebody who starts a business due to a present or future financial crisis that pushes him/her to start a new activity.

Significance to the field

Entrepreneurship education has been limited only to those interested in business and who have already decided to undertake a business venture. The understanding searched by this study enlarges the focus of the entrepreneurial to those who are not comfortable with their work life and/or those who want to start a new stage of their lives. This study will inform entrepreneur educators how to become more effective when promoting entrepreneurial spirit.

This research is also relevant to the field of business management. Human resource practices to deal with early retirement can be enlightened by encouraging entrepreneurship. Adults close to retirement age could become important strategic partners of their former employers if they decide to start a business. The implicit knowledge (Nonaka, 1998) could be strategically used by companies by promoting older employers to start their businesses.

On the other hand, helping adult professionals start their own businesses could be a good strategy to reduce the negative effects of mass layoffs. This approach could be very interesting for labor unions trying to help their associates when layoffs are announced.

Limitations to the Study

This study establishes a difference between entrepreneurs by opportunity and entrepreneurs by necessity. Even though the outcome is similar no matter what the trigger, the process to become an entrepreneur is different when caused by opportunity rather than by necessity. The perspective transformation when the process is triggered by opportunity occurs spontaneously, in contrast to the perspective transformation caused by necessity where adults have no options. When the transformation is caused by necessity, the transformation is triggered by an explicit disorienting dilemma (i.e., a financial crisis). When the transformation is caused by opportunity, the event generating the transformation and how this event is experienced is unclear. Understanding the causes of entrepreneurial behavior by opportunity will help to create a better educational environment to facilitate transformations and, as a result, foster entrepreneurship.

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[1] Autopoiesis: The concept of autopoiesis tries to capture an essential characteristic of living organisms (auto=self, poiesis=production). Its purpose and definition are stated in Maturana and Varela (1980): “Our aim was to propose the characterization of living systems that explains the generation of all the phenomena proper to them. We have done this by pointing at Autopoiesis in the physical space as a necessary and sufficient condition for a system to be a living one.” “An autopoietic system is organized (defined as a unity) as a network of processes of production (transformation and destruction) of components that produces the components which: (i) through their interactions and transformations continuously regenerate and realize the network of processes (relations) that produced them; and (ii) constitute it (the machine) as a concrete unity in the space in which they (the components) exist by specifying the topological domain of its realization as such a network.”