Chapter Three: Entrepreneurial development 43 CCHHAAPPTTEERR TTHHRREEEE EEnnttrreepprreenneeuurriiaall ddeevveellooppmmeenntt Mr Ah Koy* said entrepreneurs were not born, they were made, and with ‘vision and the burning desire to be the best’, Fijians could succeed in the business world. He said the technicalities of running a business were simple, but it was the psychological aspect that separated the successful from those who just managed to survive financially. A positive mental attitude, definiteness of purpose, going the extra mile, a pleasant personality, customer satisfaction, all these contribute to the development of a business, he said. Reported in the Fiji Times (1 April 1995, p.9) *Ah Koy was the Trade Minister in 1995 and later became the Finance Minister Chapter Three: Entrepreneurial development 44 3.1 INTRODUCTION This chapter reviews the literature on entrepreneurship and provides a particular focus on small tourism businesses and the correlation between individualism/collectivism and entrepreneurship. The literature review will investigate the information available about each research question. The chapter will also explore the contentious issue of whether or not entrepreneurial dispositions are inherited or developed, and whether the personality traits of successful entrepreneurs can be measured. The case for undertaking a comprehensive literature review in entrepreneurship research has been advocated by Gartner (1989): Entrepreneurship researchers cannot make important contributions to the field unless they know what already has been contributed. Good scholarship in entrepreneurship requires that each be consciously connected to previous work done in the field. A working knowledge of the field sharpens ideas and can lead to new insights via more focused studies. (Gartner, 1989, p. 28) Although Fiji has a relatively developed tourism industry, there is a paucity of contemporary and rigorous research on the operation of small tourism businesses, on culture and entrepreneurship and on the relationship between these three domains. This researcher has identified only two studies published during the post- independence period, which focus specifically on small business. One of these studies (Techno-Economic Survey Team, 1969) explored the opportunities available to local people in small businesses generally. The other study (Hailey, 1985) focussed specifically on indigenous businesses. Other studies have been either of a very general or of a highly specific nature, such as tourism master plans (UNDP/IBRD, 1973; Coopers and Lybrand, 1989; Deloitte and Touche, 1997); visitor profile (Plange, 1985); the socio-cultural, economic and environmental impacts of tourism (Varley, 1978; King, Pizam & Milman, 1993; TCSP, 1992); resort planning (King, 1997); globalisation (Harrison, 1997); destination profiles (King and McVey, 1998); tourism Chapter Three: Entrepreneurial development 45 planning (McVey and King, 1999), the effects of political instability (Berno and King, 2001). With the exception of Qalo’s (1997) case study on a communally owned Fijian business (outside the tourism sector), no study has carried out a detailed analysis of tourism entrepreneurship, or of small tourism businesses. Nor has any assessment been undertaken of the entrepreneurial dispositions of either large or small business owners in any sector of the Fiji economy. In view of this limitation, the present literature review has been broadened to include research on entrepreneurship and small business in a range of settings beyond Fiji. 3.2 THE DEFINITIONAL CHALLENGE Over the past thirty years the use of terms ‘entrepreneur’ and ‘entrepreneurship’ in the business world have become clichés. The terms have been used to describe a very diverse group including those who ‘play three-card monte on Times Square to the heads of giant corporations’ (Brodsky, 1996, p. 33). Newspapers have referred to inner-city drug dealers, brothel keepers, politicians and cabdrivers as entrepreneurs. Cannon (1991) described entrepreneurs as ‘economic heroes’ (Morrison, Rimmington and Williams, 1999). It appears that the criterion of profit making has been used loosely to categorise any type of businessperson who qualifies as an entrepreneur. If we adhere to Drucker’s (1985) definition of the entrepreneur as an ‘opportunity seeker’, all of the individuals noted above would be classified as entrepreneurs. Despite widespread interest and usage of the terms, a concise and universally acceptable definition of entrepreneur and entrepreneurship has proved elusive and controversial (Hill and McGowan, 1999; Nodoushani and Nodoushani, 1999; Cunningham and Lischeron, 1991; Gartner, 1990; Perry, 1990; Drucker, 1985). The imprecise nature of these two terms has led Morrison, Rimmington and Williams (1999) to conclude that ‘it is considered a futile pastime to attempt to fashion a clear- cut definition of what an entrepreneur is’ (p. 29). Similarly, Fairbairn and Pearson Chapter Three: Entrepreneurial development 46 (1987) noted: Economists have found it difficult to deal with the concept of entrepreneurship. Problems arise in defining it and in identifying the role and significance of entrepreneurs in the growth process. Lack of agreement on these and related matters has given rise to differing theories of entrepreneurship and to different perceptions of the functions of entrepreneurs. (Fairbairn and Pearson, 1987, p. 9) In comparing the search for a universal definition of entrepreneurship to ‘hunting the heffalump’, Kilby (1971) wrote: The search for the source of dynamic entrepreneurial performance has much in common with hunting the Heffalump. The Heffalump is a rather large and very important animal. He has been hunted by many individuals using various ingenious trapping devices, but no one so far has succeeded in capturing him. All who claim to have caught sight of him report that he is enormous, but they disagree on his particularities. Not having explored his current habitat with sufficient care, some hunters have used as bait their own favourite dishes and have them tried to persuade people that what they caught was a Heffalump. However, very few are convinced and the search goes on. (Kilby, 1971, p. 1) Other researchers have also highlighted the vagueness of the concept of entrepreneurship. Herron, Sapienza and Smith-Cook (1991), for example, noted the absence of a consistent definition of entrepreneurship, while Brazeal and Herbert (1999) attributed this state of affairs to the ‘field’s uneven development, its lack of consistency of terminology or method, and its relative isolation from developments in key informing fields’ (p. 29). The lack of agreement is also emphasised by Hill and McGowan (1999) who have stated that entrepreneurship is ‘best understood as a process, the constituents of which are the entrepreneur, their persistent search for opportunities, usually grounded in the marketplace, and their efforts to marshal the resources needed to exploit those opportunities’ (p. 7). Tripathi (1985) likened an entrepreneur to a ‘hat that has lost its shape because of overuse by people who pull it into their preferred fashion’ (Furnham, 1992, p. 168). Research on entrepreneurship has been compared to the test given to the blind men in the Hindu parable. After touching an elephant, each blind man identified it as a Chapter Three: Entrepreneurial development 47 different animal (Brazeal and Herbert, 1999). Wilken (1979) compared entrepreneurship to a process of spontaneous combustion in which the spark [entrepreneurship] is ignited by a catalyst [entrepreneurial disposition]. Long (1983) stated that an effective definition of entrepreneurship should include all activities that are entrepreneurial and exclude those that are not. The problem with this simplistic approach is, however, the need to reach agreement about using consistent criteria capable of distinguishing entrepreneurial from non-entrepreneurial activities. Furthermore, such definitions do not take into account the contributions of people who have benefited from inheritances such as Henry Ford Jr.; those who buy an existing business and convert it into a profitable venture; or those who resurrect a dormant business. According to Brodsky’s (1996) criteria, such people would not qualify despite the fact that Henry Ford Jr. clearly stood out as an entrepreneur. He would also not qualify according to a variety of other definitions. Who then is a genuine entrepreneur? Webster’s Dictionary defines entrepreneurship as ‘the creation of new, innovative, profit-oriented, visionary economic organizations that exist in uncertain environments that carry some risks’ (quoted in Davis and Long, 1999, p. 25). Gartner’s (1989) definition also emphasises novelty. He found the topic of entrepreneurship ‘inherently complex and multidisciplinary’ (p. 27) and defined entrepreneurship as the creation of new ventures, and entrepreneurs as the creators of new ventures where there were none before (1988, 1989, 1990). Baumol (1993) cautioned against adoption of a rigid application of the term, ‘because whatever attributes are selected, they are sure to prove excessively restrictive, ruling out some feature, activity, or accomplishment of this inherently subtle and elusive character’ (p. 7). According to Brodsky (1996), real entrepreneurs are people who start a business from scratch with nothing ‘except what they themselves bring to the party – a concept, a few contacts, maybe some capital, plus all of those intangible qualities that are important to success in any new venture’ (p. 34). He further stated that entrepreneurs Chapter Three: Entrepreneurial development 48 survive on 'internally-generated cash flow' (p. 34). This definition may, however, be unduly restrictive if one adheres to the view that genuine entrepreneurs are constantly on the lookout for new business opportunities and that ‘internally-generated cash flows’ are often inadequate for further business expansion. The following examples demonstrate the limitations of the restrictive definitional approach. Should a roadside fish and chip shop, or a Fijian cultural group such as the fire walkers, be considered as an example of entrepreneurship? If the entrepreneur is an innovator in the Schumpeterian sense of introducing a new product or service, the fish and chip shop owner and the Fijian fire walkers after all ‘create neither a new satisfaction nor new consumer demand’ (Drucker, 1985, p. 19). Describing such operations as entrepreneurial would seem far-fetched. On the other hand, adopting a prescriptive approach may preclude a range of business activities that have a genuine claim to exhibiting entrepreneurial spirit. Some entrepreneurs may succeed in presenting an established idea in an innovative way. Based on the literature survey, it appears that entrepreneurship is generally associated with the creation of new ventures. What is less clear is whether it refers to small, to large businesses, or to both. Berger (1991) and Drucker (1985) associated entrepreneurship with new and small businesses. According to Vesper (1980), new ventures could take several forms: as a joint venture between two or more existing firms; as a corporate entity, or as an independent venture initiated by one or more partners acting in their own interests. A synthesis of the various perspectives on entrepreneurship leads to two conclusions: (1) that entrepreneurship is synonymous with new ventures, and that (2) the term is applicable to small as well as large enterprises. Despite the general tendency to use the terms interchangeably some writers, such as Hansemark (1998), have, however, sought to dissociate entrepreneurship from self-employment or small businesses. Hansemark viewed the entrepreneur as a small business operator, and vice versa, but distinguished the entrepreneur as a person playing a more proactive role. According to Chapter Three: Entrepreneurial development 49 his analysis, small business is ‘bonded with family needs,’ whereas an entrepreneur has innovative traits and is focussed on ‘profit and growth’ as characterised by such entrepreneurial behaviour as alertness to opportunity, innovation, and ‘creative destruction’. The latter behaviour has been described as a process by which ‘innovation supplants old products and methods, enhances productivity, and ultimately leads to economic growth’ (Solomon, 1986, pp. 110-111). Drucker (1998) suggested that innovation is a better criterion for judging a small business than age and size. The term ‘innovation’ was first associated with entrepreneurship by Schumpeter (1942). Innovation is the conversion of ideas into products, services and processes, and is the result of creative thinking, perseverance, ingenuity, and imagination (Baumol, 1993; Grigg, 1994; Couger, 1995). It goes hand in hand with creativity. While creativity involves idea generation, innovation means converting such ideas into fruitful business activities and a mindset that has a strategic vision (Kuczmarski, 1996). According to Kao (1989), creativity ‘implies a vision of what is possible, the entrepreneur translates that creative vision into action [innovation], into a human vision which guides the work of a group of people’ (p. 17). Considerable advances have been made in developing a better understanding of the concepts of ‘entrepreneur’ and ‘entrepreneurship’. The ongoing search for standard definitions is, however, unlikely to ‘eliminate the substantial complexity of the subject which is a primary source of our confusion, perplexity, and delight’ (Sapienza, Herron, and Menendez, 1991, p. 257). This is partly because entrepreneurs are not homogeneous; they come from diverse backgrounds, exhibit different leadership and management styles and motivation levels (Woo, Cooper, and Dunkelberg, 1988). Churchill and Lewis (1986) expressed similar views when they summarised the challenge of researching entrepreneurship: Words used to describe the field of entrepreneurship research are “young,” “at a formative stage,” and “still in its infancy.” Even the definition of entrepreneurship is neither agreed upon nor static. It is restricted by some to new ventures, viewed by others to necessitate personal risk, and more recently has come to include initiatives in any organization that involve Chapter Three: Entrepreneurial development 50 innovation, a new strategic direction involving risk, and a significant new combination of strategic “factors of production.” The field is young, complex, involved in a process of discovery and transition, and the recipient of increased attention and the basis for economic hope. It is a field involving, appropriately, considerable discovery-oriented research; hence, it is no wonder that its research directions are fragmented, creative, and diverse. (Churchill and Lewis, 1986, p. 334) The absence of a standard definition of the terms ‘entrepreneur’ and ‘entrepreneurship’ creates a number of challenges. According to Carsrud, Olm and Eddy (1986), ‘lack of a generally agreed upon definition is a shortcoming that misdirects research efforts and leads to a lack of a coherent body of research literature’ (p. 367). Because of the problem of operationalising the terms, it is difficult to undertake research replication precisely and to base subsequent research on previous work (Carsrud and Olm et al., 1986). Cunningham and Lischeron (1991) have stated that the conventional association of entrepreneurship with small business has blurred the subject matter and has largely eliminated large firms from consideration. For the purposes of the present research, it is worth noting that large firms do appear capable of embracing the entrepreneurial spirit (Harper, 1985a). For this reason they have not been excluded from the present research. 3.3 THE ROLE OF ENTREPRENEURSHIP IN NATIONAL DEVELOPMENT Schumpeter (1942) popularised the concept of entrepreneurship in his book ‘Capitalism, Socialism and Democracy’. This work predicted the gradual demise of small businesses (Solomon, 1986). According to Solomon’s (1986) interpretation, Schumpeter believed that ‘technical innovation was becoming increasingly complicated and required coperative [sic] effort by teams of scientific specialists rather than individual tinkering and inspiration’ (p. 42). He predicted that the ‘growth Chapter Three: Entrepreneurial development 51 of large corporations would eventually ‘socialize’ the individualistic, capitalistic spirit’ (p. 42). Contrary to Schumpeter’s prediction, small business has not perished, and has proceeded to lay the foundation for many economies around the world. Entrepreneurs – large and small – have been catalysts for change, growth and innovation in a competitive market economy characterised by globalisation and structural change (Kirchhoff and Phillips, 1987; Timmons, 1994; Hodgetts and Kuratko, 1995; Muzyka, Konig, and Churchill, 1995; Scott, 1996; OECD, 1998; Wajewardena and Tibbits, 1999). As Bromley (1985) said: There is now overwhelming evidence that Lenin’s … generalization that “large-scale machine industry completely squeezes out the small enterprises” is untrue. Instead, small enterprises are continuously in a state of flux, with new foundations, expansions, contractions, take-overs and extinctions continually taking place in adjustment to the expansion and contraction of large- scale enterprises, so that they play a role in both the causes and the effects of the changing structure of the economy. (Bromley, 1985, p. 323) During the nineteenth century entrepreneurship was a dominant catalyst for the growth of the US economy (Solomon, 1986). The phenomenon experienced a resurrection in the USA during mid 1970s and rose to cult status during the 1980s, rekindling the ‘enterprising spirit by reawakening the animal spirits of capitalism’ (Solomon, 1986, p. 11). The USA of the 1980s was dubbed the decade of small business, leading former President Reagan to describe it as the ‘entrepreneurial age’. When confronted by economic recession, high unemployment, and negative international trade trends on a scale not seen since World War 11, Americans rekindled their interest in small business. The USA was severely impacted by the global economic recession prompting politicians and policy makers to recognise entrepreneurship as a vehicle for reducing future unemployment and increasing economic prosperity. Particular attention was focused on the capacity of small business to achieve these twin objectives because of its adaptability to changes in a volatile environment. Furthermore, globalisation demands entrepreneurial behaviour from all enterprises – large and small - and information technology has narrowed the advantage that corporate enterprises enjoyed relative to start-up operations (Richman, 1997). Chapter Three: Entrepreneurial development 52 Like the current technological revolution, the entrepreneurial revival of the Reagan Presidency created a revolution in business philosophy which made small business ‘more beautiful in the marketplace’ (Nodoushani and Nodoushani, 1999, p. 45). The upsurge in entrepreneurship occurred not only in commercial organisations, but also spread to non-profit service-provision organisations, such as governments, cities, towns, and universities. As stated previously, even drug dealers and others involved in shady businesses were described as entrepreneurs. From the USA the enthusiasm for entrepreneurship spread to the European countries including France, the United Kingdom and Italy. Small business was also seen as an engine of economic growth in these countries, and was often contrasted with large corporations which were described as ‘something of a dinosaur with bureaucratic organizations, and increasingly unable to compete in a post-industrial world’ (Nodoushani and Nodoushani, 1999, p. 45). For example, 45-65% of exports from Italy consists of products manufactured by small-medium enterprises, ‘sometimes made by people who can’t even read and write’ (Vinyaratn13 in Asian Week, December 2002, p. 23). Another reason for the global interest in small business enterprise is its ability to adapt quickly to changes in the internal and external environments. Whereas the emphasis was previously on large corporate entities, the European Union has put increasing emphasis on the creation of indigenous (small) businesses that have their roots in the local economy (Garavan and O. Cinneide, 1994). The Organisation for Economic Co- operation and Economic Development (OECD) now regards entrepreneurs as not only agents of change, but instruments for the introduction of new products and services in the consumer market replacing industrial and military goods (OECD, 1999). Despite the positive contribution made by entrepreneurs to the national economy, some researchers have regarded them with suspicion. Entrepreneurs have been described as parasites that damage the economy, particularly when they engage in unproductive activities such as rent seeking or enter into already profitable business 13 Pansak Vinyaratn is the Chief Economic Advisor to the Prime Minister of Thailand.