The role of the entrepreneur in the growth of their company

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By Arthur Gamberini and Adeline Leroy

The entrepreneur, an underestimated factor of growth

Neoclassical microeconomic theory presupposes that at a given market size, the company will increase sales until the unit selling price of its products equals their marginal cost (Mansfield 1979; Samuelson and Nordhaus, 1989). However, this theory has proven its inadequacy to explain the growth or non-growth behaviour of a company in general (Rumelt, Schendel and Teece, 1991).

Schumpeter (1942) first demonstrated the importance of the role of the entrepreneur in the phenomenon of growth. In an SME, the strategic decision-making power is almost entirely in the hands of the leader. Although they may be influenced by others at times, it is the leader’s will that triggers action. Investigations on the impact of entrepreneurial orientation on a firm tend to confirm its association with the firm’s success (e.g., Becherer and Maurer, 1997; Lumpkin and Dess, 1996; Shepherd and Wiklund, 2005; Wiklund, 1999)

“The more entrepreneurial oriented a firm is, the more it will grow” (Eggers et al., 2013)

Forgetting that the motivation of the leader is an essential factor of growth itself would have the result of negatively impacting growth: it will only end up creating problems that prevent the entity from surviving.

 Growth-culture and the entrepreneur’s vision

Management and owners need to establish a growth culture and mindset while providing support to maintain the spirit of transformation. The key issues are the capabilities and attitudes of the leaders and owners of SMEs. Everything starts from the top, the personal ambition of the founder of the company, their strategy and the size/turnover goals that are planned with a management team. Unless they are broad-minded and can seize opportunities, their teams will fall on themselves.

It needs to be in the SME owner/manager’s DNA to seize opportunities at the right moment. A co-founder of a data collection firm mentioned that this vision is almost a concept in itself and can be considered by some as the main quality of an entrepreneur, namely, his ability to have the vision to define a three-to-five-year strategy.

What factors determine a leader’s desire for growth?

Many factors describing the typology of the leader have already been identified as factors affecting their desire for growth. The age of the CEO has an impact on growth, as does his level of education (Kolvereid, 1992; Strese et al., p.453-52, 2018). The question of employee leaders (who are neither founders, heirs, nor buyers), is a matter of debate. Some note that whether the leader is the founder or not may have a significant influence (Delmar and Wiklund, 2008). The salaried manager can push the growth of his company out of a need for personal accomplishment (Davidsson, 1989) or other economic motives that are owned only by the company.

The close structure and direct surroundings of the executive also have a positive influence when structured, especially for high-tech SMEs (Kotkin, 1986; Feeser and Willard, 1989).

Some negative factors of the leader, with implications for the SME, have also been observed. Very strong personalities who have shown an immense will to impose an idea can become a negative factor later by refusing to change their mind even though the company’s environment is no longer the same. The company could then abruptly stop growing and even go bankrupt (Zaleznik, Larçon and Reitter, 1979).

REFERENCES

Davidsson, P. Entrepreneurship and after?   A study of growth willingness in small firms. Journal of Business Venturing, 4: 211-226.

Greiner, L.E.   Evolution and revolution as organizations grow. Harvard Business Review. 50 (4):  37-46.

Delmar, F.; Wiklund, J. 2008, The effect of small business managers on firm Growth: a longitudinal study, Entrepreneurship Theory and practice.

Mansfield, E.   Microeconomics:  Theory and Applications. NY:  Norton.

Kolvereid, L. 1992.  Growth aspirations among Norwegian entrepreneurs. Journal of Business Venturing, 7:  209-222.

Rumelt,  R.P.,  Schendel,  D.   Teece, D.J.   Strategic Management and Economics.

Strategic Management Journal, 12:  5-29.

Schumpeter, J.A.   Capitalism, Socialism and Democracy. NY: Harper.

Zaleznik, A. 1992. Managers and leaders: are they different? Harvard Business Review, 60 (2):  126-135.

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