Entrepreneurs’ self-efficacy – the individually perceived competence to master entrepreneurial challenges – is essential for nascent entrepreneurs to survive the challenging process of establishing a new venture. In a recent study we analyze data from 753 nascent entrepreneurs to show that those who identify with entrepreneurship as a way of becoming rich and gaining power, perceive themselves to have greater entrepreneurial competence than those who essentially understand entrepreneurship as a method to make the world a better place. For society at large, this might have serious consequences for the types of entrepreneurial opportunities that are executed. In this blogpost we condense our findings and explain where the differences might stem from.
In 2017, the well-known entrepreneur Elon Musk was asked at a conference in Dubai to offer advice for young people wanting to become like Elon Musk, and replied “I am not sure I want to be me.” Since he was a child, Elon Musk knew who he was and who he wanted to be, as he said about the time when he was in college “I wanted to be involved in things that would change the world.” Nevertheless, gaining the competence and perception to really change the world took him on a rollercoaster ride of highs and lows in his career and personal life. There are many more examples of entrepreneurs with a mission to change the world for the better who have struggled in their early career until they really perceived they had the competence to become a successful entrepreneur. Particularly in the early stages of a venture, it is important that entrepreneurs perceive themselves to be able to adequately address forthcoming entrepreneurial challenges. On the downside, being overconfident as an entrepreneur potentially results in venture failure as such overconfident entrepreneurs set unattainable goals.
We studied the behavior and entrepreneurial spirit of 753 nascent entrepreneurs at 39 higher-education institutions in Germany. The results show that entrepreneurs who are still in the process of founding their company have different levels of perceived competence with regard to being successful entrepreneurs. Not surprisingly, the results show that conducting activities like launching marketing or promotion efforts or already selling the product, help nascent entrepreneurs to enhance their entrepreneurial self-efficacy. Additionally, having a general sense of controllability, which means that you do not let external factors dictate what you are doing, also leads to higher levels of self-efficacy among nascent entrepreneurs. However, these well-established explanations do not tell the whole truth. A significant amount of entrepreneurs’ perceptions of how competent they are can be explained by their social identity. Nascent entrepreneurs with an entrepreneurial social identity primarily based on economic self-interest and competition (i.e., Darwinian entrepreneurs) are more likely to perceive themselves to be effective entrepreneurs than those who base their social identity on advancing a cause that benefits society at large (i.e., missionary entrepreneurs).
Why are Darwinian entrepreneurs more likely to perceive their entrepreneurial self-efficacy to be high than are nascent entrepreneurs with a mission to change the world? Generally self-efficacy can be developed through the experience of accomplishments, vicarious learning, positive feedback, and a stable physical and emotional state. Obviously, enjoying accomplishments is far more difficult for those who are driven by advancing a cause benefiting society at large than for those who are basically driven by economic self-interest. Since most of us live in free market economies where the model of competition and financial success is deeply rooted, those self-interested entrepreneurs who aim to be successful in these dimensions are more likely to receive positive feedback and to find appropriate role models.
Nevertheless, our results also show that the reasons for these differences do not stem from differences in the education or experience of these entrepreneurs, which leads us to the conclusion that differences might only be perceived rather than real. Imagine asking a physician about his or her management competences. Even if s/he did a really good job in managing the medical practice, s/he would probably primarily feel competent in the realm of saving lives and would associate management competency with other groups of people.
The same might be true for entrepreneurs who primarily want to advance a socially beneficial cause. Their main goal is to achieve a societal vision such as reducing income inequality through entrepreneurial projects, so they identify with skills and competences such as empathy and impact measurement. To realize their ambitions, they nevertheless need basic entrepreneurial skills like being a good communicator and successfully managing an organization. The physician would not be able to save lives without a functioning medical practice. Accordingly, we might ask whether entrepreneurs with a missionary social identity need to have and perceive competences in entrepreneurial skills to economically, ecologically, and socially tackle grand challenges.
What could we do to foster entrepreneurial skills especially among nascent missionary entrepreneurs? Learning about entrepreneurship and gaining experience in entrepreneurship helps different types of entrepreneurs to feel more competent but, as our study shows, does not mitigate differences in perceived competences between entrepreneurs with different social identities. We need nothing less than a change in the classification of certain skills among different types of entrepreneurs. Just as we should teach students of medicine that running a medical practice competently is part of a physician’s DNA, we should also teach nascent missionary entrepreneurs that entrepreneurial skills like managing innovation are the foundation of sustainably applying solutions to societal problems. Furthermore, we now know that nascent missionary entrepreneurs might not feel wholly competent in the skills of entrepreneurship, even when in reality they are. This is why education should help those entrepreneurs to truly experience their entrepreneurial self-efficacy through teaching methods like service-learning, and offering them the experience and positive feedback they need to alter their perceptions of competence. Such a policy could help transcend the frontiers of commercial entrepreneurship and social activism by rewarding individuals who base their social activities on solid entrepreneurial skills and competences. Specifically, more funding and promotion for social entrepreneurship could create an awareness among nascent entrepreneurs that possessing basic entrepreneurial skills and a missionary social identity can serve one and the same end.
About the authors
Leif Brändle is a PhD candidate at the Entrepreneurship Research Group, University of Hohenheim, Stuttgart, Germany. He is facilitator of the Startup Garage Hohenheim and part of the organizing team of the Social Innovation Summit in Zurich/Stuttgart, the largest conference on social innovation and social entrepreneurship in the German-speaking countries.
Andreas Kuckertz, Dr. rer. pol. habil. (University of Duisburg-Essen) is Professor of Entrepreneurship at the University of Hohenheim, Stuttgart, Germany. He is also president of FGF e.V., the largest and leading association of entrepreneurship and innovation scholars in Germany, Austria, Switzerland, and Liechtenstein.