Sbaer Uca - Small Business Advancement National Center ...

SBI 

SBI 

Fostering Entrepreneurial Education Together 

Small Business Institute Journal 

SBIJ Volume 3, 2009. 

University Of Central Arkansas 

SMALL BUSINESS INSTITUTE 

ISSN 1944 - 1169

Continuing a Tradition...... 

Letter from the President 

The Small Business Institute® Journal is one of the many benefits of membership in the Small 

Business Institute® association (SBI). SBI is the premier organization for pedagogical research 

using field-based student experiential learning. Along with this journal, SBI offers a student case 

competition, a national conference, professional development opportunities and much more. 

Check us out at www.smallbusinessinstitute.biz. 

The Small Business Institute® Journal provides a focused approach to a wide range of research 

regarding small business and entrepreneurship issues. It embraces pedagogical manuscripts, 

thereby enabling scholars and practitioners to share findings and best practices in their 

disciplines. 

We appreciate your interest in this Journal and welcome your submissions. All submissions are 

blind reviewed by three individuals. 

We believe the Small Business Institute® Journal fills a valuable need in the field with a top 

quality journal. We hope you agree. Enjoy! 

Ronald Cook, Ph.D. 

President 

Small Business Institute® 

| II 

Small Business Institute Journal, Volume 3, April,2009

2009 Small Business Institute® Officers and Board 

President: 

Ron Cook, Rider University 

cookr@rider.edu 

President-Elect: 

Patti Wilber, Northwestern Oklahoma 

State University 

plwilber@nwosu.edu 

Vice President of Programs: 

Stephanie Bardwell, Christopher 

Newport University 

bardwell@cnu.edu 

Vice President of Programs-Elect: 

Michael Harris, East Carolina University 

harrismi@ecu.edu 

Secretary/Treasurer: 

Jeff Shields, University of Southern 

Maine 

jshields@usm.maine.edu 

Vice President of Marketing and 

Communications: 

Paul Belliveau, Rutgers University 

belliveau@att.net 

Vice President of Research and 

Publications: 

Leo Simpson, Seattle University 

simpsonl@seattleu.edu 

| III 

Immediate Past President: 

Bruce Kemelgor, University of Louisville 

bhkeme01@louisville.edu 

Board Members: 

Bert Scott, Indiana University, 

Northwest 

bert@iun.edu 

Craig Zamzow, Plymouth State 

University 

czamzow@plymouth.edu 

Howard VanAuken, Iowa State 

University 

vanauken@iastate.edu 

Editor, Journal of Small Business 

Strategy: 

Fred Fry, Bradley University 

Editor, Small Business Institute® 

Journal: 

Don Bradley, University of Central 

Arkansas 


Stephanie Bardwell 

Christopher Newport University 

Newport, Virginia 

Joe Bell 

University of Arkansas, Little Rock 

Little Rock, Arkansas 

Paul Belliveau 

Rutgers University 

Rutgers, New Jersey 

Naomi Birdthistle 

University of Limerick 

Ireland 

Francois Brouard 

Carleton University 

Ontario, Canada 

Noel Burchell 

Unitec Business School 

New Zealand 

Shawn Carraher 

Cameron University 

Lawton, Oklahoma 

Peggy Chaudhry 

Villanova University 

Villanova, Pennsylvania 

Renee Foster 

Delta State University 

Cleveland, Mississippi 

Shanan Gibson 

East Carolina University 

Greenville, North Carolina 

Michael Harris 


Greenville, North Carolina 

Dr. Don B. Bradley III, Editor 

Editorial Review Board 

Kirk Heriot 

Columbus State University 

Columbus, Georgia 

Cecilia Hegarty 

University of Ulster 

United Kingdom 

| IV 

Theresa Hrncir 

Southeastern Oklahoma State University 

Durant, Oklahoma 

John R. Hendon 

University of Arkansas, Little Rock 

Little Rock, Arkansas 

Jamaluddin Husain 

Purdue University 

Hammond, Indiana 

Colin Jones 

University of Tazmania 

Australia 

Jeanette Lemmergaard 

University of Southern Denmark 

Denmark 

Patrick McCaskey 

Millersville University 

Millersville Pennsylvania 

Alberic Pater 

Triodos Facet 

The Netherlands 

Jean Raar 

Deakin University 

Australia 

David Resnik 

Johnson and Wales University 

Providence, Rhode Island 


Don Scimpaglia 

San Diego State University 

San Diego, University 

Jeffrey Shields 

University of Southern Maine 

Portland, ME 

Leo Simpson 

Seattle, University 

Seattle, Washington 

Ken Simpson 

Unitec Business School 

New Zealand 

Matthew Sonfield 

Hoftra, Univeristy 

Long Island, New York 

Anna Stankova 

University of Economics, Prague 

Czech Republic 

Harriet Stephenson 

Seattle University 

Seattle, Washington 

Sherrill Taylor 

Texas Woman’s University 

Denton, Texas 

David Tweed 

Massey, University 

New Zealand 

Howard Van Auken 

Iowa State University 

Ames, Iowa 

Carol Wittmeyer 

St. Bonaventure University 

St. Bonaventure, New York 

Darush Yazdanfar 

Mid Sweden University 

Sweden 

| V 


SMALL BUSINESS INSTITUTE JOURNAL 

CONTENTS 

SMALL BUSINESS INSTITUTE…………………………………………………………..…….III 

OFFICERS AND BOARD 

EDITORIAL REVIEW BOARD.....................................................................................................IV 

LETTER FROM THE EDITOR.....................................................................................................VII 

BUSINESS INCUBATION IN THE UK 2007-2008..…………………………………………….1 

A PRACTICIONER’S VIEW 

Martyn Benson, Rotherham Youth Enterprise, United Kingdom 

EXAMINING THE RELATIONSHIP BETWEEN……………………………………...…….….21 

PERSONALITY AND ENTREPRENURIAL 

ATTITUDES: EVIDENCE FROM THE U.S. 

COLLEGE STUDENTS 

Michael L. Harris, East Carolina University 

Shanan G. Gibson, East Carolina University 

Todd D. Mick, Metropolitan Community College of Kansas City 

*DEVELOPMENT OF A REVENUE……………………………………………………….……52 

MANAGEMENT CHECKLIST 

Jeff Shields, University of Southern Maine 

Joyce Shelleman, University of Southern Maine 

*INNOVATION: THE SOUL OF ENTREPRENEURSHIP……………………….………...…..76 

JoAnn C. Carland, Carland College 

James W. Carland, Carland College 

POTENTIAL EFFECTIVENESS OF SALESPERSON………………………………….…...….98 

MIRRORING EMPATHY AND TRAINING 

IN SELLING TO SMALL BUSINESS: 

AN EXAMINATION 

Robin Peterson, New Mexico State University 

Bing Xu, New Mexico State University 

Yam Limbu, New Mexico State University 

PUBLIC RELATIONS ENTREPRENURS……………………………………………...………132 

SATISFACTION, MOTIVATION, AND CHALLENGES 

Betsy Hays, California State University, Fresno 

Shannon Ritchey – Escovedo, California State University, Fresno 

*Award Winning Paper At The 2009 SBI Conference in St. Petersburg, FL 

| VI 


Small Business Institute Journal | VII 

Letter from the Editor 

This third edition of the Small Business Institute Journal represents a lot of hard work from 

reviewers, authors, and Small Business Advancement National Center staff. I would like to 

thank those three groups for all their time and energy. This edition has two papers that were 

chosen as the Outstanding Papers at the Small Business Institute Annual Conference in St. 

Petersburg, Florida on February of this year. 

I personally would like to thank the officers of the Small Business Institute, the University of 

Central Arkansas, and the UCA College of Business Administration for their help and support 

for this project. The journal has been able to keep its acceptance rate at 25% and is listed in 

Cabell’s. 

If you have any articles that you would like to submit, please do so because we are always 

looking for outstanding papers that deal with Small Business and Entrepreneurship. The overall 

support of the Small Business and Entrepreneurial community has made this journal a success. 

Lastly, I would like to personally thank my two outstanding interns Derius Campbell, and Nicole 

Klück. 

Sincerely, 

Don B. Bradley III, PhD. 

Editor 


Manuscripts 

|VIII 


Business Incubation in the UK 2007 – 2008 

(A Practitioner’s View) 

Martyn Benson 

Business Coach 

Rotherham Youth Enterprise 

Civic Building, Walker Place 

Rotherham, UK 

Email: martyn.benson@rothernham.gov.uk 

Small Business Institute Journal, Volume 3, April,2009 

| 1

Abstract 

Objectives: To set out, in a clear and structured way, an experienced practitioner’s view of 

current business incubation work in the UK and based on that, to set out a personal view on what 

should be best practice in business incubation 

Prior Work: The writer’s own experience of working with start-up businesses for over 30 years 

and specifically in business incubation over eight years. CPD work for business support 

accreditations over 15 years. Research work for previous papers on Business Support presented 

to ECSB, ISBA (2) and ISBE (2). Research and consultation for this paper. 

Approach: Combining a record of direct personal experience – focussing heavily on the period 

of work in an award winning local authority business incubation and business support operation - 

with research into the business incubation methods used in other organizations and information 

from third party reports on business incubation in the UK. 

Results: A 7,000+ words review of business incubation as practised in the UK - seen through 

the eyes of a practitioner. 

Implications: That business incubation is not just providing premises for start-up businesses. 

That advisers working with start-up businesses and new businesses need at least as wide if not 

even wider expertise than those working with established businesses. 

Value: Hopefully to be one of the reference works for business incubation centre personnel and 

in particular the business advisers working with start-up and new businesses. 

Introduction: 

This paper is based on: the writer’s own experience of working with start-up businesses for over 

30 years, including as an Executive at a successful Enterprise Agency 1 and recently specifically 

in business incubation for over eight years, CPD (Continuous Professional Development) work 

for business support accreditations over 15 years, research work for previous practitioner papers 

on Business Support presented to ECSB (European Council for Small Business), ISBA (Institute 

for Small Business Affairs) [2] and ISBE (Institute for Small Business and Entrepreneurship) [2], 

6+ years of liaison with a University’s Enterprise Centre which incorporates a ‘Hatchery’, and 

finally research and consultation for this paper. 

Although the writer is currently a Business Adviser with Rotherham Investment & Development 

Office (RiDO) and Rotherham Youth Enterprise, it should be stressed that the paper incorporates 

his personal views - combining a record of direct personal experience – focussing heavily on the 

period of work in an award winning local authority business incubation and business support 

operation - with research into the business incubation methods used in other organizations and 

information from third party reports on business incubation in the UK. 

1 Business support operation typically providing free advice/information service to small start-up and developing 

SMEs. 


| 2

Business Incubation: 

Definition: 

It is necessary to identify clearly what is meant by ‘business incubation’ and hence ‘incubators’. 

It is not simply the provision of buildings earmarked for use by ‘start-up’ businesses – that is 

simply providing premises. Indeed it can be dangerous, both financially and in terms of lower 

than expected outcomes in job creation and GDP, to concentrate solely on building premises 

(comprising small units for new businesses) without considering the total needs of new 

businesses. Instead, successful ‘business incubation’ in the UK is a support process that involves 

many stages and requires a holistic approach. 

Business Incubation is defined by UKBI (UK Business Incubation 2 ) as: “A unique and highly 

flexible combination of business development processes, infrastructure and people designed to 

nurture new and small businesses by helping them to survive and grow through the difficult and 

vulnerable early stages of development.” (© UK Business Incubation Limited 2006) 

Alternatively, it is defined by NESTA (National Endowment for Science, Technology and the 

Arts, UK) as “A technique whereby promising new firms are provided with a managed and 

structured environment in which they can grow to their potential”. 

‘Incubators’ are, therefore, the premises or environments in which the ‘business incubation’ 

process is conducted. 

The Business Incubation Process: 

The author believes that, in the UK, the holistic approach begins with psychology – as successful 

business owners/entrepreneurs need to have the right mindset to operate a business. That is to say 

they must have the confidence, skills and determination needed to run a business. Those factors 

need to be present to at least a reasonable degree at the outset but the first two may, as part of the 

support process, be identified, by professional advisers, as areas where coaching and training 

would result in significant improvements – to at least the level needed for a pre-start scenario. 

As part of that pre-start scenario, the potential business owners/entrepreneurs need to be able to 

assemble the resources (financial, human and physical) needed to launch the business. The 

writer’s view of the methodology in the UK is that ideally ‘Business Incubation’ should, 

therefore, provide a support package that encompasses: 

An initial unbiased assessment of the business owner and the potential business. To 

ensure a consistent approach this is probably best done by using a ‘diagnostic tool’ – e.g. 

the Forum 21 evaluation. 

If necessary, access to ‘business start-up’ training. 

Access to suitable business advisers and preferably also to business mentors with relevant 

sectoral experience. 

2 An initially Government sponsored organisation set up to promote Business Incubation and to act as a members’ 

organisation for the sector. 


| 3

Advisers and mentors readily available in the pre-start scenario, next as the business 

launches and then again as it develops. Those advisers and mentors may need to 

challenge client assumptions and to ensure growth, set the clients targets. 

If necessary, a facility to refer a client to banking, financial and other professional service 

providers (e.g. accountants and commercial lawyers). 

Awareness of relevant funding available to clients from grant schemes – local, regional 

and national and commercial sources. 

The ‘incubator’s’ own ‘networking’, ‘inter-trading’ and training events plus a regular 

‘newsletter’. 

Almost certainly, introductions to local business networks – e.g. Chamber of Commerce, 

‘Buy-Local’ (supply chain link), Manufacturers’ Groups etc. 

Links to local academic institutions that can provide specialised research, student 

placements e.g. STEP (Shell Technology & Enterprise Programme) and/or have 

‘knowledge transfer’ programmes. 

Links to trade support – whether for export or import 

A business location – which may initially only be ‘virtual’ (providing a business address 

and mail facilities) or actual premises. 

Tangible aspects of the process: 

Premises are an extensive topic but the main physical considerations are: 

Ideally a location with good transport links for both employees of the businesses based 

there and for movements of goods and services to and from the businesses. Adequate 

parking on site or available nearby. 

Modern or modernised premises that give confidence to occupiers and to visitors to 

occupiers. 

An interior layout and facilities that make for comfortable working conditions. 

Accepting that few new businesses will be likely to require units of over 200 sq. m.; a 

range of sizes of offices and/or workshop units. 

Good communication systems with full ICT cabling and ‘broadband’ links. 

On –site facilities should include: 

Flexible occupancy terms – to permit movement on site or even off-site with limited 

notice and limited penalty. Licences, rather than leases may be used. 

On-site clerical and other support facilities – extending to ‘on-site’ business advice that is 

linked to the local business support network. 

Meeting and/or conference facilities - preferably with projection and sound equipment 

available. 

Timescales: 

The time that a business is located in an ‘incubator’ will vary but ideally there should be 

nearby ‘grow on’ space available to accommodate a business when it has outgrown the 

‘incubator’. There may be an exit policy - limiting the period a business can be in an 

‘incubator’ to as short a term as 12 or 18 months but generally business growth is usually a 


| 4

eason for moving out at around the 36 months after start-up point. 

Eligibility: 

‘Incubators’ are intended for new businesses and in some locations particularly for new 

businesses that will generate significant increases in GDP and contribute to innovation. The 

‘funding package’ for an incubator may influence the eligibility rules for occupancy – that 

may, in the UK, be based on SIC (United Kingdom Standard Industrial Classification of 

Economic Classifications 3 ) codes. 

The right combination of suitable premises, on–site support and access to support networks, plus 

an enterprising and entrepreneurial culture in the ‘incubator’ should result in an environment that 

will result in a high business survival rate and high business growth rates. 

The successful Public Sector model that was adopted in Rotherham, in the 1990s, is operated by 

its local government – Rotherham Metropolitan Borough Council and in chronological order of 

actions the approach comprised: 

1. Appointing an enterprising Business Centres Manager. 

2. Use of an existing Council owned Business Centre but with business advice facilities 

added. 

3. In an area where demand had been established by means of research; Building a new 

specially designed, mixed use, (65 unit) business centre on a former colliery site - with 

full support facilities (including a business adviser based there and with a remit to link 

with all relevant support agencies). The centre having a focus on knowledge based 

businesses and in its first 6 years creating 450 jobs in 100 businesses. 

4. Monitoring of numbers of new businesses, employment created, levels of investment by 

clients and Adviser interventions. 

5. Building a further, ‘business quarter’ located business centre aimed at the creative, digital 

and professional services sectors. Again with full support facilities including its on-site 

business adviser. 

The above mentioned ‘incubation’ structure was sufficient to gain Rotherham Metropolitan 

Council the 'Champion of Business Incubation' Award by UK Business Incubation (UKBI) in 

November 2005. Since then, to fill a gap in provision, a further mixed use business centre was 

commissioned and opened in August 2008. A final mixed use centre, again on a former colliery 

site – to complete borough wide coverage with ‘business incubation’ – was commissioned for a 

late 2008/early 2009 opening. 

After initial funding, the Centres are expected to be self-financing but not to generate significant 

surpluses. 

It is clear from the above information that the SME and large businesses that closed in the heavy 

industries in Rotherham were not replaced by newer versions of the same. Regeneration 

3 The system is identical to the EUROSTAT system NACE at its 4 digit level and the United Nations system ISCIC 

at the 2 digit division level. 


| 5

therefore depended heavily on new start businesses – including those in the Council’s 

‘incubators, as well as ‘new starts’ in managed workspace, inward business investment plus relocations 

and (especially in the Dearne Valley) the setting up large ‘call centre’ operations. The 

current business incubation model in Rotherham and indeed probably the models in most UK 

locations, would not lend themselves to the development of new heavy industry operations but 

are relevant to specialist ‘high added value’ operations - such as those metal producers and 

finishers linked to the aircraft industry – hence the existence of the Advanced Manufacturing 

Park (AMP) in Rotherham and the aim that the ‘incubator’ opened August 2008 will see some of 

its start-up businesses develop and move on to the AMP. 

Models of Business Incubation in the UK 

Depending on how ‘business incubation’ is defined, there were 300+ 4 incubation environments 

in the UK as at July 2008. The Rotherham model, which is centred on an operation managed by 

the local authority – i.e. it is ‘public’- is far from being the sole form of business incubation in 

the UK. A distinction can be made between ‘privately run’ and ‘publicly run incubators’ - where 

responses to the last UKBI ‘mapping exercise’ in 2005 suggest that the split is 79% ‘public’ and 

‘21%’ ‘private’ but that is perhaps too simplistic. Instead, the author believes that, apart from 

those provided by public institutions, the two other principal types of ‘incubator’ are: 

‘Commercial incubators’: 

These are operated by private or corporate businesses – albeit in some locations there will have 

been part-funding by regional government and there could be a further sub-division for those. 

An example of such an ‘incubator’ is the Normanby IDEA Centre managed by Zernike (UK) 

Ltd. This is located at the Normanby Enterprise Park on the edge of Scunthorpe in North 

Lincolnshire. The location is on part of the site of a former steeI-works – so there is a parallel 

with the Rotherham experience. 

The Centre focuses on ICT businesses although other sectors will be considered for occupancy. 

Occupiers are expected to have a viable business plan that indicates that they will, in due course, 

develop out of the Centre. Occupiers are expected to enter into the ‘incubation’ process – 

including a detailed performance review at the end of Year 1. 

The Centre was originally sponsored by the Government’s Regional Development Agency and 

its aim is to encourage small business start-ups that will benefit the local economy. 

The Centre provides furnished [office] accommodation, meeting rooms and presentational 

equipment. 

There is not a ‘free of charge’ on-site Business Adviser but such support is available from the 

local South Humber Business Advice Centre. 

Another example is Great Western Enterprise Ltd. of Swindon. It has a workspace division that is 

a totally commercial operation of several business centres providing a combination of fully 

serviced offices and workshops for a wide range of clients – albeit only a limited number would 

be classed as ‘high growth’ businesses. The division has a sophisticated management system and 

can provide customised support and training solutions for clients. The business advice function is 

4 UKBI, 13 July 2008 


| 6

provided by the associated Business Link business support operation and the total process can, 

therefore, be classed as ‘business incubation’. 

University Based Business Incubators: 

Universities provide an important source of start-up businesses – whether as ‘spin-outs’ from 

academic projects or from the other entrepreneurial activities of staff and students. Many UK 

universities have, therefore, chosen to set up their own ‘business incubators’. 

An example local to the author’s base is the Leeds Met ‘Business Incubator’ operated by Leeds 

Metropolitan University in Yorkshire. It supports the University’s graduates and other 

entrepreneurs from the area in starting and developing businesses. With funding from the 

Government’s Higher Education Innovation Fund (HEIF) it provides a range of business support 

services in serviced accommodation – currently for 25 businesses. Applicants are assessed on 

their business idea and needs by the onsite Business Adviser – so that they can be provided with 

the relevant support services that are available during the first 3 years of a business’ existence. 

Other well known University or College linked business incubators are: 

The University of Warwick Science Park (UWSP) – which has operated since 1984 – with its 

own buildings for initial incubation, ‘grow on’ space and major single occupancy plus later 

satellite sites at two other locations with a major focus on incubation activity and which have led 

to niche market clusters of businesses. 

UWSP offers several services to client businesses – e.g. ‘CLUSTERS’, ‘Ignite’, ‘KITTS’, 

‘Minerva’, ‘ShellSTEP’, ‘Stepenterprise’, ‘TTP’, ‘Techmark’. 

UCLan (University of Central Lancashire) was recently judged, in the latest Higher Education – 

Business and Community Interaction (HE-BCI) survey to be the best in its region for the number 

of business start-ups by its graduates. 

Campus Ventures is a technology business incubator located at the University of Manchester but 

which also provides a base for the business incubation work of Manchester Metropolitan 

University. It has been used as model for other business incubation projects. 

The Food Business Incubation Centre at Loughry Campus in Northern Ireland. Opened 10 years 

ago it has a pre-incubation programme for businesses planning to rent (on licence basis) one of 

the 8 purpose built food processing factory units that enable new businesses to operate in totally 

suitable and legal conditions. 

UKBI member Coventry University has (July 2008) been named by EBN (European Business & 

Innovation Centre Network) as the best university in Europe for creating new businesses from 

students’ work (by supporting ‘spin-offs’ and business incubation initiatives). 


| 7

Other ‘Incubators’: 

The other significant forms of business incubators should not be overlooked and they are: 

‘Social Enterprise’ Business Incubators: 

Although these are run on commercial lines – i.e. they should be self-financing, there is a slightly 

different ethos to that of those run by operators who are shareholders and expect to benefit from 

the profits of operating the centres, whereas the ‘social enterprise’ operations are in existence to 

provide benefits to the community and surpluses are not distributed to the owners. 

An example of a Social Enterprise ‘Incubator’ is Wandsworth Youth Enterprise in London. It 

uses the income from ‘managed workspace’ to provide 25 subsidised business units for young 

people aged 18 - 30 needing start-up premises. The subsidised units, which are on flexible 

letting terms, are provided with centralised services, free business counselling and training 

services. There is a philosophy of encouraging personal development and an entrepreneurial 

culture plus regenerating the local community. The ‘mainstream’ managed workspace provides 

‘grow on space’ and the whole unit acts as a ‘business incubator’. 

Specialist Business Incubators: 

These are focussed on a single specialist type of business – e.g. bioscience – and as such only 

form a small but important part of the business incubation sector in the UK, e.g.: 

CELS Open Life Sciences Business Incubator at Newcastle on Tyne University and Tetricus at 

Porton Down, Salisbury. 

Digitalinc in Liverpool was the first UK business incubation unit focused on the digital 

industries. It provides office space, communications infrastructure and business support to startup 

businesses in the digital sector. 

CIRCE at Castleford in W. Yorks. is a purpose designed building, on the site of a chemical 

works, offering specialist business units for new chemical or related businesses. 

The Ethnic Business Development Corporation, London helps people from ethnic minority 

communities in S.E. London who are considering setting up in business with a business 

incubation environment and funding. 

Other ways of classifying ‘business incubators’: 


| 8

When UKBI undertook a ‘mapping’ exercise of ‘incubation environments’ in 2005 it chose to 

classify them as: 

Incubation 5 

Science Park 6 

Virtual Incubation 7 

‘Other’ 

and in the responses received to the UKBI questionnaire, 73% of incubation environments 

identified themselves as ‘non profit’ and 27% as ‘commercial’. 

Using ‘Business Incubation’ to assist in ‘Growing’ Small Businesses in the UK: 

The situation that developed in Rotherham and South Yorkshire towards the end of the 20 th 

Century, i.e. the severe decline in the numbers of units of traditional heavy industry and in 

numbers of their employees, is not untypical of other areas in the UK. The decline or closure of 

traditional industries resulted in a need to replace them with new businesses or new units of 

existing businesses - that would generate business income and employment. 

Many of those new businesses in South Yorkshire were, as in the case of most new businesses, 

either micro businesses or SMEs. 

It is accepted in the UK that survival rates of new businesses* (especially the ‘micros’ and 

‘small’ businesses) are highest if they have a ‘support package’ in the early stages. That ‘support 

package’ can be limited or can be a full ‘business incubation’ package with the latter having 

become more commonplace over the last 10 years – in part due to Government policies. In 2004 

the DTI (Department of Trade & Industry commented that: “it had recognised that enterprise and 

entrepreneurship was a vital contributor to the health of the economy”. That concept developed 

into a National Enterprise Agenda - that included plans to build an enterprise culture and to 

encourage a dynamic ‘start-up’ market with capability for growth – resulting in a favourable 

climate for ‘business incubation’. 

* = Using the current European definitions of business sizes, as also used by the UK’s DBERR 

(Department for Business, Enterprise and Regulatory Reform) - formerly the DTI - the 

classifications are: 

Micro businesses 0 - 9 employees 

Small businesses 0 – 49 employees (i.e. includes ‘micros’) 

Medium businesses 50 – 249 employees 

With (as previously stated) over 300 clearly identified business incubation locations in the UK 

(UKBI, 2008) – which is a high number in relation to the UK population and the number of 

5 General incubation – i.e. a mixture of business sectors on the site 

6 Site with an emphasis on science and technology based businesses 

7 Use of a Business Incubation Centre’s address to add credibility to a home based business plus possibly telephone 

answering and re-directed telephone calls and mail services 


| 9

identified businesses in the UK) – there is little doubt that business incubation is now a 

significant factor* in the ‘start-up’ and ‘early days’ business environment in the UK. 

* = in 2006 Professor John Thompson 8 commented that the statistics implied that there was an 

incubator for every 19,000 SMEs in the UK. 

By comparison, earlier this year, EBN (the European Business Incubation Centres Network) 

reported a membership of 160 Business Incubation Centres, as full members, in 21 countries, 

with a further 21 as associates - albeit those figures are only a partial representation since as at 

November 2005, ‘Science Business’ quoted E C statistics that referred to 769 business incubators 

in Mainland Europe, the Russian Federation and the UK. 

Government ‘web-sites’ – e.g. www.businesslink.gov.uk and www.ukinvest.gov.uk (UKTI 9 ) now 

provide considerable information on business incubation, business incubators and science parks 

– reflecting their importance in the business support infra-structure. 

The extent to which government support continues to be extended to business incubation seems 

likely to depend on the political complexion of the next UK government. The fact that the 

DBERR at its current size and Regional Development Agencies (RDAs) apparently might not 

(unless the political climate changes by the next General Election) survive the next change* of 

Government could be significant factors influencing the future of (publicly funded) business 

incubation. 

* = General Election required at the latest in June 2010. 

Business incubation centres that currently rely in part on public funding should very urgently 

consider how they can move on to a self-financing basis (whether by means of greater efficiency, 

higher occupancy rates, higher rent levels, hiring out of conference and meeting facilities to offsite 

businesses and organisations plus having additional income generating services). 

The £5m Business Incubation Development Fund that was launched by the DTI (now DBERR 10 ) 

in 2005 and managed on its behalf by UKBI provided support for business incubators (primarily 

in disadvantaged areas) has been fully committed and has come to the end of its life. 

The construction of further business incubation centres in the UK will need to be very carefully 

considered by potential operators. It may be that, with a few exceptions, only those proposed 

new incubation centres that have a fairly certain supply of potential ‘incubatees’ – e.g. those 

linked to universities – have a promising future. 

The Clear Value of Business Incubation: 

8 

Prof. John Thompson - Roger M Bale Professor of Entrepreneurship at Huddersfield University, UK. Member of 

ISBE 

Board. 

9 

UK Trade & Investment 

10 

Department for Business, Enterprise and Regulatory Reform 

| 10 


It is difficult to do better than to quote from UKBI (UK Business Incubation) which states: 

“Business incubators have an average success rate of 98% of their businesses succeeding whilst 

based in the ‘incubator’ and 87% surviving 5 years after start-up”. 

With the average stay in ‘incubators’ of 36 – 39 months, these figures compare to the national 

average survival rate for small businesses after 36 months of 66%. The significantly higher 

survival rate is there to be seen. 

Obviously these figures relate to the UK and other countries’ experience may differ. 

Other considerations about performance: 

The UKBI comment is impressive in itself but detailed information on the performance of 

‘business incubators’ and their occupying businesses is needed for several reasons: 

a. ‘Incubator’ operators need to be able to compare actual financial performance against 

forecast performance in project plans. 

b. Public ‘funders’ need to be able to judge the impact of their investments. This may link 

to: 

Reviewing performance against targets for: 

Job Creation 

Occupier investment in their businesses 

Sales per capita by businesses (in £). 

Personal Development of business owners 

Increasing employee skill levels 

Increased levels of innovation 

Local regeneration 

Moving businesses on to free-up space for newcomers 

Community involvement – i.e. the social impact 

Dissemination of ‘best practice’. 

Environmental awareness 

c. Data gathered can be used to plan (or otherwise) for future incubators in an area or may be 

able to be shared with other ‘incubators’ or the potential operators of new ‘incubators’. 

Government Support – justifiable or not? 

As successive Governments have had both direct and indirect involvement in business incubation 

in the UK, they are perhaps understandably supportive of the process but there are other schools 

of thought that question the place of government support for ‘business incubation’. 

In 2005, Walter Herriot – the MD of St. John’s Innovation Centre, Cambridge said that “publicly 

funded small business incubation centres are being constructed without any real understanding of 

| 11 


what they will achieve”. He wanted the RDA’s (Regional Development Agencies) to re-think 

their strategy – which he felt was providing a physical infrastructure without the ‘networking’ 

that needed to be in place. 

Similarly John Moulton of Alchemy Partners has commented that “funding linked to volume 

targets was relatively unlikely to generate good companies. We need to aim for quality not 

quantity”. He apparently felt that government help, particularly financial, could be taken too far. 

Bearing in mind that the author himself comes from a commercial, private sector background 

and is trying to present a balanced view, his view is that there is a probably a mix of incubation 

centres that can be entirely justified on a commercial basis and others where their creation with 

public monies has acted as ‘pump priming’ . 8 years ago his own base business centre was the 

only building at one end of the Manvers development – with a gap of nearly a mile to other 

buildings. The incubation centre has since created over 470 new jobs (including the on-site Youth 

Enterprise operation takes that to well over 500 jobs). Now there is an adjacent ‘grow on space’ 

with larger ‘mixed use’ units (and the site is currently being extended), adjacent ‘grow on’ office 

space and other ‘design\build commercial units being built for entrepreneurs. This is from a 

£2.7m public sector initial investment. 

Perhaps a fair assessment of ‘business incubation’ could be based on the cost per capita of job 

creation and the per capita GDP, generated over a 3 year period, for employees in businesses that 

have been subject to the business incubation process? 

The Mechanism of Setting up ‘Business Incubators’: 

Setting up a ‘business incubator’ is a similar exercise to setting up most businesses. Whilst some 

considerations will depend on the physical size of the proposed operation, the basic principles of 

starting and running a business will apply. There will, therefore, be three main stages: 

1. Pre-start 

2. Start-up (i.e. opening the doors to businesses) 

3. Development 

Pre-start: 

As with any potential business, there needs to be an assessment along the lines of: 

Has the business idea been refined down to a single clear proposition? This leads into: 

Is there actually a market for that proposition and if there is, is it possible to achieve a 

large enough share of the market to have a viable project? Then: 

Is it possible to gather together the resources (funding, physical and skills) needed? 

Depending on the type of ‘incubator’ proposed and the ‘funding package’ available, there 

will have had to be consideration of the ‘critical mass’ of the ‘incubator’ – in terms of 

physical size* and the number of occupying businesses. 

* = it is generally accepted in the sector, in the UK, that a ‘mixed use’ business centre 

normally needs to be 25,000 - 30,000 sq. ft. of accommodation for full commercial 

viability. Full commercial viability in this case being defined as with rental income able 

| 12 


to cover all ‘overheads’ including finance costs. 

Finally: Who are going to form the ‘Board’ if to be run by a company or who will form the 

‘management team’ if it is to be a ‘public’ project? 

Clearly the ‘pre-start’ stage requires significant amounts of research and planning, plus it may 

well include a combination of bidding for funding and negotiating terms on finance. If (as seen 

in Rotherham and other areas of the UK) the project includes re-using former industrial land then 

major soil testing and remediation work may be required before the ground-works for new 

buildings can commence. 

New ‘incubation centres’ will be expected to be good examples of sites geared up for energy 

conservation and with as small a ‘carbon footprint’ as is economically feasible. 

‘Start-up’: 

From the pre-start stage, it will be necessary to move on to commissioning property alterations 

and/or new build work – including all the latest communication systems for the site and systems 

to meet the security and administration requirements of the site. Suitable business support staff 

for the site will need to be recruited and where necessary, trained. 

Very few ‘incubators’ are fully occupied as soon as they are ready to receive client businesses. 

Therefore suitable marketing and ‘networking’ will need to be undertaken by the project team 

ahead of the actual opening of the ‘incubator’ and again after commencing supporting occupying 

businesses. 

An ‘incubator’ needs to build up to its ‘critical mass’ as soon as possible – i.e. it needs to reach 

whatever was designated as its target occupancy and income (if appropriate) as soon as possible 

– certainly within 12 months. During the first phase of operation, say for 18 months, the business 

support provided needs to be regularly reviewed and assessed as to its successful impact or 

otherwise. The information collected can then be used for remedial action or in the next (i.e. 

development) phase. 

Development: 

Information obtained in the start-up phase is likely to lead to developments in the ‘incubator’ – 

e.g. over the second 18 months: 

Entry eligibility rules may need to be changed. This could be a ‘tightening up’ – to focus 

more clearly on the ethos of the project or might be a relaxation once public funding support 

had expired. Almost certainly an ‘incubator’ will need to ‘fine tune’ the support process in 

line with clients’ needs whilst demand for space may require a formal exit policy for 

successful businesses and this links to planning and commissioning of ‘grow on’ space. Last 

but not least, up-dating of ICT systems will inevitably be required. 

| 13 


Maturity: 

After 36 months there should be: The start of the significant ‘churn’ of businesses caused by 

growing businesses moving out – to be replaced by new ‘start-ups’. Fully developed and refined 

‘on-site’ business support services. Fully developed and refined links with ‘off-site’ business 

support services. Very importantly there should be recognition in the local business community 

of the effectiveness of ‘incubation’. 

A successful ‘incubator’ should have businesses that can be used as examples of best practice in 

fields such as: 

Knowledge Transfer 

Research & Development 

Quality Control 

Skills Training 

The Limits of ‘Business Incubation’: 

Perhaps one of the most important truisms in business support is that “Business Incubation will 

not change a bad business idea into a good one.” 11 

This has to be the most relevant limit associated with ‘business incubation’. It is, therefore, 

important for ‘would be entrepreneurs’ to have their business projects vetted before being given 

space in an ‘incubator’ and if necessary, skilled guidance given in appraising a project - so that 

realism avoids space being allocated to a business that will not succeed and owners do not waste 

time, money and effort on ‘non-starters’. 

‘Business incubation’ is intended to support new small* businesses through their first few years 

and to see them grow as successfully as possible. As previously mentioned, in order for ‘business 

incubation’ to be as successful as possible, the author believes that the support process (in an 

‘incubator’ or in a limited geographic area) should be all- encompassing and provide the best 

possible culture and environment for a new business to succeed. 

* By their nature – with relatively small offices and/or workshop units – most UK ‘incubation 

centres’ are geared to accommodate new businesses which, in UK definitions, would be either 

‘micro’ or ‘small’ businesses but which are assessed as having the scope to grow rapidly 

(especially in terms of contribution to GDP). The implication of that being: 

initial staff numbers will usually be in single figures 

business management will have specialist (sectoral) skills but will need some guidance 

on other business issues 

larger new businesses should have a management team with all the skills needed or the 

finance to buy in specialist skills and may be too large to be accommodated in 

‘incubator’ units 

11 Benson, Filippova and Matushevskaya – July 2007. 

| 14 


Depending on the local business support environment, not all promising new businesses that 

would benefit from an ‘incubation’ environment may be identified as such whilst they proceed 

through the ‘pre-start’ or ‘start-up’ phases. They may only be identified when their activities have 

brought them to public notice and they are too late to access ‘incubation support’. 

Alternatively, it may be difficult to find suitable local ‘mentors’ for new businesses operating in 

highly specialised fields. 

In some cases, due to the terms of ‘public’ funding for individual ‘incubation centres’ or 

management policies to support only certain sectors, some types of businesses – no matter how 

apparently promising - will be unable to gain access to an ‘incubator’. An example of this would 

be ‘over the counter’ retailing. 

The business support staff (including Advisers) in a ‘business incubator’ can usually only guide 

the owners on how to successfully develop businesses. If owners choose to ignore correct 

guidance, then the support staff are usually powerless – unless the terms of an occupancy 

agreement are breached and the breach justifies action. 

The Important Role of the Business Adviser in Business Incubation; 

As previously touched on, the existence of a ‘business incubation’ scenario implies that support 

is available from a ‘Business Adviser’. That adviser may in practice need to be a combination of 

adviser, counsellor, coach and mentor – depending on the issues faced by the owner\owners and 

the point in the life of the business that the third party support is called on. 

In an ideal world, the business adviser is first consulted when the business idea is still in the 

‘thought bubble’ stage and the adviser can be any combination of information provider, 

‘signpost’ and ‘sounding board’. Even if a total expert on what the client is proposing (relatively 

unlikely - in that such an adviser is likely to be a ‘specialist generalist’), it is vital not to be 

judgemental but to guide the client into having enough information and a methodology with 

which to evaluate the business idea. This may be as easy as guiding the client into a ‘funnelling 

down’ process or there may be a need for considerable market research leading into a detailed 

business plan and financial forecasts – in order to be able to form a proper view as to feasibility. 

It has to be the client who initially decides, by their own efforts, as to whether the business idea 

is a good one or not. That view might be subsequently challenged by the business adviser, by 

potential funders etc. but that challenge will be to the position that a client arrived at without 

prompting or undue influence. 

Moving on to the first review of the business plan, related financial forecasts and other 

information provided by the potential ‘business starter’; it is important for the business adviser to 

be empathetic with the client. If being self-employed is so easy, arguably more people would be 

doing it – so it is important to realise the major step that people make if moving from a regular 

salary (possibly with pension provision) or coming off benefit or disability allowance, into a 

situation with uncertain income. Potential ‘starters’ may need to develop (very quickly) a whole 

| 15 


new set of skills and business advisers should be constructive when talking to potential business 

owners about them. 

The information in and the work that went into the first version of the business plan are more 

important than the presentation. A ‘fancy layout’ can come later. The adviser is hoping to see the 

basic details of an apparently viable ‘business start-up’. It is quite possible that the client may 

need to be guided to obtain more focussed market research information and as to what (if 

anything) realistically a Bank might be prepared to lend to the business or investors to contribute 

and then amend the plan accordingly. 

The adviser then repeats the business plan and financial forecasts review process – commenting 

[constructively] as needed – until it is clear to the client as to whether or not the business seems 

likely to succeed (at an acceptable level to the owner and any other stakeholders). 

NB The adviser should not be writing the business plan – as that would make reviewing it 

objectively very difficult – but should guide as to content, style etc. 

Depending on business type and location, there may be grant funding or other business support 

available. It is vital that, by means of ‘networking’, research etc., the adviser is aware of 

potential current funding streams (sub-regional, regional and national). This is the sort of 

information that clients may not have or may not know how to locate. 

If there is apparently the basis of a good business, the business structure (e.g. sole trader or 

partnership or limited company) is in place, the necessary funding package is available, the 

business type matches the eligibility for the incubator building or incubation area, suitable 

accommodation is available and the owner\owners is\are still ‘up for it’ - then the business is in a 

position to start. 

Unless there is a large and multi-skilled management team (with support staff), early support 

required by the business from the ‘incubator’ may well be partly on relatively mundane matters 

(handled by the incubator’s support staff) with the business adviser focussing on the main 

business issues. 

Bearing in mind that by now the business should have [SMART] objectives and targets as part of 

its business plan and a definite strategy, it is up to the business adviser to work with the business 

to see how the plan is working in practice. It is almost certain that there will be divergences – so 

the important questions will be: 

Why is this figure\performance different? 

Do we need corrective action and if so what is that action? 

The level of involvement of the adviser should reduce as the business settles down and is 

successful but even then a monthly ‘heads up’ is a good idea and this is where the coaching and 

mentoring tends to replace pure advice, counselling or information provision. However, the 

adviser will need to be additionally involved if the business hits problems or if it is expanding 

and in any case, until a business is genuinely self-sufficient*, involvement should be maintained. 

| 16 


* = In a typical ‘incubation’ scenario this is likely to be at the 36 – 39 months stage and even 

then the Adviser may remain involved when the business has moved ‘off-site’. 

Finally, back in the pre-start discussions, there should have been consideration of the future exit 

strategy or strategies – for outside stakeholders, if appropriate, and most certainly for the 

owner\owners. It does no harm for a business adviser to check if a business is still working 

towards that strategy or strategies. 

From the above comments, it can be seen that a Business Adviser operating in a business 

incubation environment needs to be able to use a variety of interviewing techniques and be 

comfortable in advising, coaching, counselling and mentoring scenarios. The Adviser needs to be 

able to work with businesses from those at the pre-start stage through to first or second stage 

development and to have a wide network of relevant support sector contacts that can be called 

upon. 

Realism: 

Apart from in areas where there is a dearth of premises for start-up businesses; as business 

incubation centres are likely to have [higher] rental costs, that reflect the full package of support 

services, those rental and services costs (whether £12 per sq. ft. p.a. or £29 per sq. ft. p.a.) need 

to be seen to represent value for money. If not, then ‘market forces’ will result in businesses 

going to cheaper ‘standard’ accommodation – even though (due to the potentially lower levels of 

support) that could be to the disadvantage of businesses and (due to low occupancy) result in 

incubation centres that are not economically viable . 

‘Business incubation’ cannot protect incubating businesses from ‘market forces’ – even if those 

forces extend to unfair competition. It is important that incubating businesses fully understand 

the competitive and litigious world in which they operate. 

Involvement by incubation centre support staff has to be at an appropriate level. In the UK, an 

Adviser may not be able to be as involved as much as he/she wishes. Any possibility of overinvolvement 

– i.e. in management decisions in a company - has to be avoided – in case the 

Adviser could be deemed to be a ‘shadow director’ and thus risk penalties if a company had to 

close down due to trading or legal difficulties. 

The author believes that ‘business incubation’ is best used in circumstances where new small 

businesses are ‘knowledge intensive’ and are providing new innovative products and services or 

significantly improved products and services. That way the businesses are actually finding new 

niches in existing markets or opening up new market sectors or in some cases even creating 

whole new markets. 

Therefore, whilst ‘business incubation’ is limited by not being applied to all business sectors it 

should, if correctly used, have a significant impact on those sectors where it is applied. This leads 

naturally into the next consideration. 

| 17 


Classification of ‘Incubators’: 

In practice there is no UK classification of ‘incubators’ that is directly linked to measurement of 

success of ‘incubated’ businesses. The only current objective method of judging performance is 

by means of ‘benchmarking’ of business incubation centres – an exercise that has been 

successfully undertaken by UKBI. 

There are several definitions of ‘benchmarking’ – which is one of the business decision ‘support 

tools’. 

Dictionary definitions are: “A standard against which something can be measured. A survey 

mark of previously determined position used as a reference point.” 

For the purposes of this paper, it is also useful to refer to the European Commission initiative 

‘Benchmarking in Europe’ which defined ‘benchmarking’ as: 

“A practical tool for improving performance by learning from best practices and the processes by 

which they are achieved”. 

In view of the need (for economic success and maximum beneficial impact) to ensure that 

‘business incubation’ is as successful as possible at all locations where it is part of the business 

support process, ‘benchmarking’ of incubation is obviously very important. The measures of 

success referred to earlier (in The Clear Value of Business Incubation section) were mainly 

‘smart’* targets – albeit some were related to softer ‘social’ targets and were taken from UK 

‘incubation’ projects. 

(* = in this case ‘smart’ = specific, measurable, achievable, realistic, time based) 

As a separate project, the writer has been involved with business consultants on devising a 

potential measurement system that measures the success of ‘incubated’ businesses and which 

could be used on an international basis. 

This is done by means of the businesses completing a standard questionnaire. The answers from 

the questionnaires generate (weighted) scores that allow comparisons of success between 

businesses in different business incubation environments in the same region or in different 

countries or on different continents. 

The initial findings [perhaps unsurprisingly] reflect that, on average, businesses that had gone 

through an ‘incubation’ process generated better scores than those that had received ‘standard’ 

support. 

It would be useful for the limited initial survey process to be refined and sufficient personnel 

made available at incubation environments for sampling to generate fully valid statistics. 

What would happen without Business Incubation? 

Without ‘Business Incubation’ there would apparently be a smaller stock of established (i.e. at 

least 36 months old) businesses in the UK. That comment is based on the following statistics: 

Average Survival Rates of UK Start-up Businesses at 36 months 

| 18 


Located In Business Incubators VAT Registered Businesses All start-ups 

90% 12 

71% 13 

41 - 49% 14 

The UKBI figures represent a decrease in the ‘incubated’ survival rate since 2007 but the 

significant difference between ‘incubated’ start-up businesses and all start-up businesses is there 

to be seen. 

Whether the additional GDP, generated by incubated businesses over and above the GDP 

generated by those businesses that have been left to their own devices, is equal to or more than 

the costs to taxpayers of the publicly funded elements of business incubation in the UK is a 

question to which the answer is unfortunately not readily available. 

However, NESTA states that: “a well-managed business incubation environment can play an 

important role as an ‘anchor’ in a region, ensuring that an essential range of valuable skills and 

other capacities remain in place and are accessible to a wide group of small businesses and 

entrepreneurs, thereby driving regional competitiveness.” 15 The absence of such an ‘anchor’ 

increases the risk of loss or dispersal of such skills. 

NESTA also states that: “the more than 12,000 businesses in business incubation environments in 

the UK are indirectly estimated to support some 41,000 businesses in their local area or sector. 

Firms based in Sheffield’s Technology Park are estimated to have added £50m to the city’s 

economy in a five year period.” 16 

Even accepting that some businesses in ‘business incubators’ will have gone through a selection 

process based on likely viability (providing a higher likelihood of survival even before on-going 

intervention by ‘incubator’ staff), it is reasonable (based on the statistics given above) to believe 

that, without the additional support provided in incubation environments, a smaller number of 

new business would have survived had they all been created outside the ‘incubators’. 

Conclusions: 

A building with the title Business Centre, Innovation Centre or Technology Centre does 

not guarantee the existence of a ‘business incubation’ environment. It is the business 

support process that is the critical consideration. 

That business support process needs to be carefully planned, delivered in a structured 

way and suitably maintained. 

12 UKBI 

13 DTI Small Business Service 2007 (Newer figures not available) 

14 Lowest - the ONS and HMRC 2008, highest - Enterprise Connection 

15 NESTA Policy Briefing – Business Incubators, November 2008 

16 NESTA Policy Briefing – Business Incubators, November 2008 

| 19 


With around 300 clearly identified ‘business incubation centres’ in the UK, there is little 

doubt that ‘business incubation’ is now a significant factor in the ‘start-up’ and ‘early 

days’ business environment. 

Continuing Government support for ‘business incubation’ cannot be taken for granted. 

Business incubation centres that currently rely in part on public funding need to consider 

how they can move on to a self-financing basis. 

The construction of further ‘business incubation centres’ will need to be very carefully 

considered (in terms of financial viability) by potential operators. 

In a ‘free market’ scenario, ‘business incubation centres’ where there is demand, with 

good track records for business support and with successful clients will normally be those 

with the highest occupancy rates. 

The quality of the support staff in ‘incubators’ and of the business advice available to 

‘incubating’ businesses will have an impact on the levels of success of those ‘incubatees’. 

The business incubation process apparently significantly increases business survival 

rates. 

With numerous highly successful ‘business incubation centres’ or clusters of ‘incubation 

centres’ across the UK, there are many examples of ‘best practice’ that could be used as 

models for new ‘incubators’ or for struggling business incubation environments requiring 

revitalisation. As people like to talk about their success or successes, they are a good 

starting point for enquiries. After all, imitation is the sincerest form of flattery isn’t it? 

Acknowledgements: 

Benson, M., Filippova, M., and Matushevskaya, H. July 2007 

Business Link (UK), 2008; 

DBERR (UK), 2008; 

DTI (UK), 2004; 

EBN, 2008; 

European Commission, Directorate-General Enterprise, April 1997 

Herriot, Walter – St. John’s Innovation Centre, Cambridge 

Moulton, John - Alchemy Partners Ltd. 

NESTA Policy Briefing – Business Incubators, November 2008. 

RiDO, 2008; 

Thompson, John Prof., 2006; 

UKBI, 2004, 2006, 2007, 2008; 

UKTI, 2008; 

| 20 


Examining the Relationship between Personality and Entrepreneurial Attitudes: Evidence 

from U.S. College Students 

Michael L. Harris 


East Fifth Street 

Greenville, North Carolina 27858 

Email: HarrisMI@ecu.edu 

Shanan G. Gibson 


East Fifth Street 

Greenville, North Carolina 27858 

Email: Gibsons@ecu.edu 

Todd D. Mick 

Metropolitan Community College of Kansas City 

3200 Broadway 

Kansas City, Missouri 64111 

| 21 


Abstract 

The current study examined the degree to which seven personality variables, creativity, 

self efficacy, openness to experience, risk tolerance, perseverance, variety seeking, and strong 

judgment were correlated with entrepreneurial attitudes in U.S. college students. The 

Entrepreneurial Attitude Orientation (EAO) was used to measure entrepreneurial attitudes based 

on the constructs of achievement, innovation, personal control and self esteem. Findings 

indicated that with the exception of risk avoidance, all of the personality constructs correlated 

with at least two of the entrepreneurial attitudes. However, patterns of correlation were not 

consistent across male and female students. In particular, creativity and entrepreneurial self 

esteem were found to significantly differ along gender lines, with males having higher creativity 

scores and females possessing stronger levels of entrepreneurial self esteem. 

Introduction 

As indicated in various reports from the Global Entrepreneurship Monitor (GEM) 

entrepreneurs are constantly pursuing new business ventures based on both opportunity and 

necessity. Specifically, entrepreneurship has long been considered a powerful source of 

economic growth and innovation (Reynolds & White, 1997). The current study proposes to 

examine the relationship between various personality constructs and entrepreneurial attitudes. 

The goal is to determine not only if these personality traits are correlated with entrepreneurial 

attitudes, but also if any gender differences exist. 

The rest of this manuscript is organized as follows: a review of the role of personality 

| 22 


constructs in entrepreneurship research, followed by a description of entrepreneurial attitudes as 

measured by the Entrepreneurial Attitude Orientation scale (EAO). Next, consideration is given 

to the role of gender in entrepreneurship, and finally three hypotheses are put forth for 

examination. This background information is followed by a discussion of the methods utilized in 

the current study, the findings of our research, and lastly a section discussing the implications of 

our findings and plans for future research. 

Entrepreneurship and Personality 

Personality, Attitudes and Entrepreneurship 

Management research has made extensive use of psychological personality variables as 

predictors for constructs such as leadership, organizational behavior, and entrepreneurship. 

According to Rauch and Frese (2007a), personality variables serve an important role in the 

development of a consistent entrepreneurship theory. As such, they call for the inclusion of 

entrepreneurship as a more “active participant” in the revival of personality research (p. 44). The 

current study makes an effort to do that by examining the role of individual differences in 

relation to entrepreneurial attitudes. 

Prior research has examined numerous personality constructs in the field of 

entrepreneurship, and various traits have been linked to business creation and success (Rauch & 

Frese, 2007a). McClelland (1961) and Collins, Hanges & Locke (2004) asserted that need for 

achievement is an entrepreneurial trait and positively correlated with business success (Rauch & 

Frese, 2007b), while Gasse (1985) and Hansemark (2003) found that entrepreneurs often possess 

| 23 


a greater internal locus of control. Research also suggests that entrepreneurs are confident 

(Robinson, 1987), have a high level of self esteem and self efficacy (Krueger & Brazeal, 1994; 

Erickson, 2002; Rauch & Frese, 2007a; Frazier & Niehm, 2006), demonstrate greater initiative 

(Bateman & Grant, 1993; Stewart, Watson, Carland & Carland, 1999), and posses a more 

positive attitude toward risk and autonomy (Douglas & Shepherd, 2002; McMullen & Shepherd, 

2006; Rauch & Frese, 2007a). In addition, creativity (Feldman & Bolino, 2000; Zampetakis & 

Moustakis, 2006), innovation (Rauch & Frese, 2007b) and improvisation (Hmieleski & Corbett, 

2006) have been linked to entrepreneurial intentions and business success. 

Obviously there are numerous personality constructs that have been shown to have 

potential for predicting either entrepreneurship or entrepreneurial success. The current paper will 

focus on seven of these which have either shown promise in previous research in terms of being 

associated with entrepreneurship or are constructs which are highly consistent with the 

definitions of the entrepreneurial attitudes of interest. 

Creativity. Creativity and innovation are often linked together and involve the willingness 

to identify novel or unique ways of action (Patchen, 1965). De Bono (1996) defines creativity as 

the formulation of something currently not available, while Feldman, Csikszentmihalyi and 

Gardner (1994) believe that creative people are good at problem solving, posing new questions, 

and identifying new products or services. As explained by Thompson (2004), creativity 

underpins innovation and innovation underpins enterprise development. Early research by 

Schumpter (1935) included creativity and innovation as core concepts for entrepreneurship. 

| 24 


Entrepreneurs have been noted for their ability to introduce new products or services into 

existing markets, as well as the identification of new markets and technologies (Rauch & Frese, 

2007a). 

Entrepreneurs face constant challenges, and creative thinking is often required to 

overcome various obstacles (Amabile, 1983). This explains why creativity (Zampetakis & 

Moustakis, 2006) and improvisation (Hmieleski & Corbett, 2006) are viewed as important 

constructs in entrepreneurship, and both can help predict new venture creation. Similarly, Rauch 

& Frese (2007b) found that entrepreneurs are more innovative than the general population, and 

innovativeness is positively correlated with business success. While creativity and innovation are 

interrelated, Rauch and Frese (2007a) believe that specific measures of creativity need to be 

studied more in entrepreneurship research. 

Self Efficacy. Bandura’s (1997) construct of self efficacy is defined as people’s judgments 

of their capabilities to execute necessary behaviors to successfully achieve desired ends. It is not 

necessarily concerned with the skills or abilities one has, but rather with perceptions of what one 

can do with the skills and abilities one possesses. Self efficacy has both theoretical and practical 

implications for entrepreneurs because initiating a new venture requires the belief that one has 

the knowledge, skills, and abilities necessary to be successful. Entrepreneurial self efficacy has 

been found to be significantly related to both entrepreneurial intentions (Kickul & D’Intino, 

2005) and new venture creation (Frazier & Niehm, 2006). Self efficacy is central to most human 

functioning, but because actions are based more on what people believe they can do than on what 

is objectively true, self efficacy should be a strong correlate of entrepreneurial attitudes 

| 25 


(Markman, Baron & Balkin, 2005). 

Openness to Experience. Openness to experience is a personality dimension that 

characterizes someone who is intellectually curious and tends to seek new experiences and 

explore novel ideas. Someone high on openness can be described as creative, innovative, 

imaginative, reflective, and untraditional. Zhao and Seibert (2006) contend that the relationship 

between openness to experience and entrepreneurship has been well accepted for many years; 

they cite Schumpeter (1935/1976) as having argued that the defining characteristic of the 

entrepreneur is his or her emphasis on innovation. Others have noted the strong desire of 

entrepreneurs to be creative and to create something larger than themselves (Engle, Mah & Sadri, 

1997). Starting a new venture is likely to require the entrepreneur to explore new or novel ideas, 

use his or her creativity to solve novel problems, and take an innovative approach to products, 

business methods, or strategies. 

Risk Avoidance. A fourth characteristic frequently associated with entrepreneurs is the 

propensity for risk-taking. Risk taking, both personal and financial, is a traditional aspect of the 

definition of entrepreneurial activity (McClelland, 1961; entrepreneur, n.d.). Researchers have 

reported significant associations between risk tolerance and entrepreneurship (Chattopadhyay & 

Ghosh, 2002), and Stewart and Roth (2001) concluded that risk-tolerant individuals are more 

likely to choose entrepreneurial careers versus risk-avoidant individuals who are likely to choose 

traditional, organizational employment. In addition, research by Sexton and Bowman (1983, 

1984) showed that a high propensity for risk-taking was a characteristic that delineated 

| 26 


entrepreneurs and non-entrepreneurs. Stewart and Roth (2001) performed a meta-analysis of 12 

studies published between 1980 and 1999, showing that the risk propensity of entrepreneurs is 

greater than that of managers. Based on this body of research, risk avoidance should be 

negatively related to individual’s entrepreneurial attitudes. 

Perseverance. The perceived ability to overcome adverse circumstances (Stoltz, 1997) 

has long been considered a requirement of entrepreneurship. According to Eisenberger and 

Leonard (1980) perseverance influences individuals’ courses of action, the level of effort 

individuals exhibit in their endeavors, and the endurance and resilience exhibited toward 

setbacks and failure (Gideon, Baron & Balkan, 2005). Markman (2007) proposes that the general 

ability to overcome adversity is a required competency in entrepreneurship because of the 

repeated obstacles and uncertain outcomes encountered. Supporting this contention, Gideon, 

Baron, and Balkan (2005) concluded that because individuals react differently to similar 

adversities, success in entrepreneurship contexts is determined by the extent to which individuals 

persevere despite what appear to be insurmountable obstacles, or adversities (Stoltz, 1997). 

Similarly, Locke and Baum (2007) consider perseverance to be among the motivating factors 

which are necessary for entrepreneurship. Their conceptualization of entrepreneurial motivation 

is synonymous with the concept of perseverance - an inner drive toward entrepreneurship goals 

that energizes, directs, and sustains new venture creation and growth. 

Variety Seeking. Efforts to explain innovative behavior are now focused upon not only 

dispositional variables, but also the interaction of individual and situational variables (Burns, 

| 27 


2007). The degree to which one has a high motivation to experience variation has been linked to 

many human behaviors, including consumerism (Mittelstaedt, Grossbart, Curtis & DeVere, 1976; 

Stanforth, 1995; Wahlers, Dunn, & Etzel, 1986 ; Workman & Johnson, 1993), food preferences 

(Potts & Wardle, 1998) , and internet preferences (Slater, 2003), among others. Pre-dating the 

term variety seeking – and typically considered the primary direct source of it – is the concept of 

sensation seeking, or desire for “varied, novel and complex sensations and experiences, and 

willingness to take physical and social risks for the sake of such experiences” (Zuckerman, 1979 , 

p. 10). This definition is in many ways akin to how we typically describe an entrepreneur, as 

someone who is willing to undertake risk in the process of beginning a new business enterprise. 

Variety seeking is also thought to develop from indirect or situational sources, and this too is 

consistent with many characterizations of new venture creation. Specifically, not all motivations 

for variation arise from an internal preference for change, but rather some develop from the 

desire to solve a problem, or as reactions to changes in the environment (Van Trijp, 1995). For 

some entrepreneurs the motivation to attempt something new is very much a response to 

situational factors including dissatisfaction with current work, inadequacies identified in current 

products, or other unique opportunities which present themselves. 

Strong Judgment. Strong judgment refers to the process of collecting information prior to 

decision making, as opposed to acting rashly and without knowledge. Very few successful 

entrepreneurs begin their enterprises without thoughtful consideration of many factors related to 

their goals. Data-driven information processing is typically associated with novel decision 

| 28 


situations (Louis & Sutton, 1991; Walsh, 1995), and the decision to create a new venture is a 

novel situation for most individuals. For many entrepreneurs data collection takes the form of 

accumulating confirming and disconfirming evidence via intensive searching for information 

related to their efforts (Learned, 1992). Baron (2000) has found that entrepreneurs are less likely 

to engage in counterfactual thinking than are others and that this leads to fewer decisions based 

heuristics or upon poor judgment. Bo Peabody, a poster-child of the multi-millionaire internet 

entrepreneur, argues that while some success stories are predicated on being lucky, many others 

are based upon being smart (Farrell, n.d.). Indeed Shook, Priem, and McGee (2003) undertook a 

review of the literature on venture creation and individual attributes associated with it and 

determined that individual judgment was a particularly important future direction for research on 

the role of enterprising individuals in venture creation because sound entrepreneurial judgment is 

required in each phase of venture creation process. 

Entrepreneurial Attitudes 

An attitude is “a complex mental state involving beliefs and feelings and values and 

dispositions to act in certain ways” (attitude, n.d.). Attitudes tend to change across time and 

situations through an interactive process with the environment, and can offer a prediction about a 

person’s future actions (Carlson, 1985). The work of Robinson, Stimpson, Huefner, and Hunt 

(1991) was one of the first to use an attitudinal scale to predict entrepreneurial activity. They 

designed the EAO model to measure entrepreneurial attitudes based on the constructs of 

achievement, innovation, personal control and self esteem. Achievement in business refers to 

| 29 


concrete results associated with the start of a business; personal control of business outcomes 

concerns one’s perception of control or influence over his or her business; innovation in business 

relates to acting on business activities in novel ways; and perceived self esteem in business 

relates to self confidence with regard to one’s business affairs. 

The theory of planned behavior argues that intention is an antecedent to behavior (Azjen, 

1991), and prior studies have shown that intentions play a crucial role in understanding the 

entrepreneurial process (Shapero & Sokol 1982; Krueger, 1993; Krueger & Brazeal, 1994). 

Shapero and Sokol (1982) argue that attitudes are linked with entrepreneurial intentions, 

especially in perceived venture feasibility and desirability. Additional research found that 

positive entrepreneurial exposure can impact intentions (Krueger, 1993), though this may vary 

according to individual characteristics and situations (Krueger & Brazeal, 1994). 

Gender and Entrepreneurship 

According to the GEM’s 2006 Report on Women and Entrepreneurship (Allen, 

Langowitz & Minniti, 2007) men are twice as likely to engage in entrepreneurial activities as 

women on a global scale, indicating the existence of a real gender gap. Similarly, past research 

has suggested that women are faced with greater obstacles when engaging in entrepreneurial 

activities. 

Some of the specific challenges women may face as they pursue business ownership 

include access to fewer resources and role models (Hisrich & Brush, 1987; Carter, 2000, 

Thomas, 2001; Marlow & Patton, 2005), as well as less managerial experience and technical 

| 30 


expertise (Chaganti & Parasuraman, 1996; Jones & Tullous, 2002). In addition, women often 

have less of a credit history (Shaw, Carter & Brierton, 2001), often causing them greater 

difficulty in obtaining loans (Verheul & Thurik, 2001; Coleman, 2002). Research has also 

indicated that women may less interested in business ownership (Matthews & Moser, 1995; 

Kourilsky & Walstad, 1997) and have less self efficacy for entrepreneurship (Chen, Greene & 

Crick, 1998). Unfortunately, these factors can cause women to not be taken as seriously and 

afforded the same level of respect as their male counterparts (Woldie & Adersua, 2004). 

While any of these aforementioned factors may impede their progress in achieving 

entrepreneurial success, entrepreneurship can be an important source of future employment for 

women. Perhaps a more in-depth examination of possible links between personality and attitudes 

can lead to a better understanding of real or perceived gender differences towards 

entrepreneurship. 

Hypotheses 

Considerable past research has indicated a strong relationship between certain personality 

characteristics and attitudes. Therefore, we offer the following hypotheses: 

Hypothesis 1: Significant positive correlations are anticipated between the personality 

constructs of creativity, self efficacy, openness to experience, perseverance, variety seeking, 

and strong judgment and the four entrepreneurial attitudes measured. 

Hypothesis 2: A significant negative relationship is anticipated between risk avoidance 

and all four of the entrepreneurial attitudes. 

Hypothesis 3: It is further anticipated that these relationships will be demonstrated for all 

participants; as the personality constructs in question are not known to be differentially 

distributed across male and female populations. 

| 31 


Participants 

Method 

Participants were 307 students enrolled at multiple colleges and universities (37% males, 

63% females), ranging in age from 17 to 57 years old, with an average age of 25.3 years. The 

schools surveyed were located across the U.S., with the common denominator being an existing 

course curriculum related to entrepreneurship. Although the students were solicited by faculty 

teaching courses related to entrepreneurship, small business management, or other topics related 

to business ownership, they were not characterized by a common major/concentration within a 

college of business, per se. 

Procedure 

During the 2007-08 academic year, faculty teaching undergraduate courses received a 

letter requesting their voluntary participation. The stated purpose of the study was to examine the 

relationship between personality variables and entrepreneurial attitudes. Faculty members have 

been asked to request that their students complete an 88-item anonymous online survey. Survey 

completion was entirely voluntary and no identifying information was recorded. 

Measures 

We measured entrepreneurial attitudes with the EAO survey instrument (Robinson et al., 

1991), along with additional measures of creativity, self efficacy, openness to experience, and 

risk tolerance (Goldberg, Johnson, Eber, Hogan, Ashton, Cloninger & Gough, 2006). The EAO is 

theoretically well grounded and provides a composite score based on four attitude subscales: 1) 

| 32 


Achievement in business (Cronbach’s alpha = .84), 2) Personal control of business outcomes 

(Cronbach’s alpha = .70), 3) Innovation in business (Cronbach’s alpha = .90), and 4) Self-esteem 

in business (Cronbach’s alpha = .73). In an early validation of the EAO the four subscales were 

shown to produce 77% accuracy in predicting entrepreneurship (Robinson et al., 1991). 

Analyses 

The primary goal of the current study is to expand upon our understanding of the 

relationship between personality and entrepreneurial attitudes among U.S. college students. 

Consistent with this, the variables of interest were examined utilizing correlation analyses. 

Because prior research has indicated some differences in the strength of entrepreneurial attitudes 

among male and female college students (Ede, Panigrahi & Calcich,1998; Harris & Gibson, 

2008), the patterns of correlation will also be examined based upon gender. 

Results 

In order to begin to assess the degree to which these personality constructs are related to 

the entrepreneurial attitudes of interest, bivariate correlations were computed for each of the 

attitudes with each of the personality variables for both nationalities. Table 1 shows the results of 

these analyses, both at the sample population level, as well as broken down by gender. 

Support for our hypotheses was mixed. With regard to Hypothesis 1, significant positive 

correlations are anticipated between the personality constructs of creativity, self efficacy, 

openness to experience, perseverance, variety seeking, and strong judgment with the four 

entrepreneurial attitudes. Self efficacy and strong judgment were significantly correlated with all 

| 33 


four variables; however, the relationship with entrepreneurial self esteem was not in the direction 

posited. Creativity, openness to experience, perseverance, and variety seeking showed similar 

patterns of correlation; each was positively correlated with entrepreneurial achievement and 

negatively correlated with entrepreneurial self esteem. The relationship between risk avoidance 

and all four of the entrepreneurial attitudes was not significant; this was inconsistent with 

Hypothesis 2. 

Table 2 provides the descriptive statistics for the four entrepreneurial attitudes and the 

personality variables for both male and female students, as well as the t-tests comparing male 

and females mean scores on the variables of interest. Contrary to Hypotheses 3, creativity and 

entrepreneurial self esteem were found to significantly differ along gender lines; while males had 

higher creativity scores, females appeared to possess stronger levels of entrepreneurial self 

| 34 


esteem. 

Discussion & Implications 

Contrary to expectations, all seven of the personality constructs were not found to be 

significantly correlated with all four of the entrepreneurial attitudes of interest. However, with 

| 35 


the exception of risk tolerance (which showed no relationship with any of the variables), all of 

the personality variables were found to be associated with at least two entrepreneurial attitudes. 

Self efficacy and strong judgment appear to be the personality constructs with the greatest 

relationship to the entrepreneurial attitudes, as they were related to all four. Likewise creativity, 

openness to experience, perseverance, and variety seeking were all found to be significantly 

correlated with entrepreneurial achievement and entrepreneurial self esteem, but not with 

entrepreneurial innovation or entrepreneurial personal control. In addition to the general patterns 

of relationship observed, some interesting distinctions presented in regards to the patterns of 

correlation for male and female students. 

One example of said difference is in relation to self efficacy. Although self efficacy was 

related to women’s entrepreneurial achievement, self control, and self esteem, it was correlated 

only with entrepreneurial innovation among men. If high levels of self efficacy help 

entrepreneurs to overcome setbacks, snags, and obstacles, and it strengthens their conviction that 

they can succeed (Bandura, 1997) then the relationship to achievement is especially important 

and should contribute to women not only entering the entrepreneurial realm, but also to their 

ability to survive long term. 

Strong judgment was more consistent in its pattern across males and females. Judgment is 

an important personality construct as it plays a critical role in decision making. Successful 

entrepreneurs are often viewed as very good decision makers, particularly in an environment of 

uncertainty, and as was pointed out by Shook, Priem, and McGee (2003), strong judgment is 

| 36 


manifest in every stage of the venture creation process. Sound judgment can allow entrepreneurs 

to succeed in situations where others are unable. As suggested by Shane (2003), entrepreneurs 

seem to have the special ability to identify opportunities that others cannot recognize, though at 

times they can make judgments before the opportunity is fully evaluated (Busenitz, West, 

Sheppard, Nelson, Chandler & Zacharakis, 2003). 

Openness to experience, variety seeking, and perseverance were all significantly related 

to entrepreneurial achievement for both males and females; however the correlation between 

openness to experience and entrepreneurial self esteem reached significance for females only. 

Within both the male and female samples, self esteem scores were negatively correlated with 

openness to experience, variety seeking, and perseverance. On the surface this may seem like a 

contradiction since individuals with high entrepreneurial self esteem would generally be thought 

to embody these other traits. However, when examined closer it may indicate that those with 

entrepreneurial self esteem have a more realistic understanding of the expectations associated 

with business ownership, and a keen understanding of the entrepreneurial process. This may 

indicate that these factors supersede self esteem and entrepreneurial success requires a great 

reliance on a creative thought process that allows for the best judgment of business opportunities. 

Entrepreneurs are often described as being broadminded and introspective; they reflect on their 

own thinking and ideas to determine potential problems and opportunities. While entrepreneurs 

must be open to new business ideas and concepts, it is through their creativity that they best 

develop solutions to take advantage of existing opportunities (Zhao & Seibert, 2006). 

| 37 


This can also help explain why six of the personality variables were significantly related 

to entrepreneurial achievement. As pointed out by Sternberg (2004), successful entrepreneurs 

often have a blend of analytical, creative and practical intelligences. Busenitz and Arthurs (2007) 

argue that entrepreneurs need both entrepreneurial and dynamic capabilities in order to identify 

business opportunities and arrange organizational resources to take advantage of these 

opportunities. Achievement is often viewed as the ultimate sign of business success and requires 

the proper mix of entrepreneurial talent and temperament. 

Creativity was correlated with entrepreneurial achievement for both men and women, but 

with entrepreneurial innovation for males only, and with entrepreneurial self esteem for women 

only. Past research has linked creativity with innovation and innovation with enterprise 

development (Thompson, 2004), and many entrepreneurs have been lauded for their ability to 

improve innovation in the marketplace (Bosma & Harding, 2006). Since creativity and 

innovation were only correlated for male students, and male students had significantly higher 

creativity scores, an interesting possibility exists. Our results seem to indicate that female 

students, while entrepreneurial in general, may lack confidence in their creative abilities and/or 

be less inclined to enter into innovative ventures. This is consistent with past research that has 

shown women are particularly attracted to the retail and service sectors because of low entry 

barriers. While Robb (2002) and Marlow and Patton (2005) suggests that this type of industry 

segregation may result from the resource restraints of female entrepreneurs, it may also result 

from personal differences between men and women. 

| 38 


Perhaps entrepreneurship education can help bridge a real or perceived gender gap in 

creativity and innovation. Sternberg (2004) suggests the amount of relevant knowledge 

individuals have at their disposal is one of the most important links to creativity. If the creative 

process involves forming novel ideas and identifying market opportunities, this serves as a 

potentially useful avenue for training students or nascent entrepreneurs to become more 

entrepreneurial in orientation. For example, teaching students to make connections among 

seemingly unrelated pieces of information can be a useful strategy. This is a task that students 

can be encouraged to perform, and which may lead to increased capability of entrepreneurial 

creativity. Similarly, Hmieleski and Corbett (2006) promote the use of simulations and role- 

playing exercises in entrepreneurship courses to help improve improvisational skills. Increased 

creativity can help nascent entrepreneurs learn how to adjust their business plans to better take 

advantage of opportunities and solve unexpected problems. 

Tolerance for risk was the only variable to show a completely consistent correlation 

pattern for males and females; as with the aggregate, it did not relate to any of the entrepreneurial 

attitudes. According to Stewart and Roth (2001) the role of risk tolerance in entrepreneurship 

has been difficult to definitively conclude because empirical studies examining the relative risk- 

taking propensities of entrepreneurs have produced conflicting findings. For instance, Brockhaus 

(1980) found no risk propensity differences between entrepreneurs and managers. More recently, 

Miner and Raju (2004) meta-analyzed 14 studies not previously considered by Stewart and Roth 

(2001), and came to a very different conclusion, that entrepreneurs are more risk-averse than are 

| 39 


managers. They conclude that the role of risk propensity in entrepreneurship remains unresolved 

and is an area for further inquiry. Consistent with the Miner and Raju findings, Xu and Ruef 

(2004) find that entrepreneurs are significantly more risk-averse than the general population with 

regard to financial decisions. Our findings support what appears to be an emerging consensus 

that risk tolerance is not necessarily associated with entrepreneurial attitudes or actions. 

Fortunately, what may be our most significant finding is the high degree of similarity 

between male and female students. Despite some gender differences, more similarities existed on 

both attitudinal and personality scores. Although past research has shown that women may be 

less confident in their entrepreneurial skills and generally less likely to actually start a business 

(Allen, Langowitz & Minniti, 2007), hopefully change is on the way. Our findings reinforce 

Brush’s point (1998) that differences related to gender alone are not conclusive and that a better 

understanding of entrepreneurial success requires consideration of the combination of personality 

traits, attitudes, and outside factors such as economic necessity. Perhaps women, especially 

young adults, are just as inclined to start a business and will do so in the future, particularly as 

they are exposed to a greater number of successful role models. 

A greater insight into the entrepreneurial temperament of college students can be used to 

develop effective entrepreneurship education programs, whether these programs are offered in a 

College of Business or through continuing education courses at local community colleges. As 

suggested by Katz (2007), entrepreneurship education can increase one’s competency and ability 

to become a successful business owner. Similarly, research shows that entrepreneurial cognition 

| 40 


(Palich & Bagby, 1995), talent (Thompson, 2004) and perspective (Kuratko, 2005) can be 

improved through education and training programs. These programs, particularly ones with 

experiential activities, can help enhance students’ self efficacy towards entrepreneurship and 

allow them to view business ownership as a viable option (Florin, Karri & Rossiter, 2007). Many 

young adults are interest in entrepreneurship and those with post-secondary academic experience 

are more likely to actually engage in entrepreneurial activities (Minniti, Bygrave & Autio, 2005). 

Future Research 

This research provides implications at both the theoretical and practical levels. From a 

theoretical perspective, our findings support the contention that psychological and attitudinal 

characteristics play an important role in understanding the entrepreneurial process and can 

influence the number of would-be entrepreneurs (Hisrich, Langan-Fox & Grant, 2007). 

Successful entrepreneurs must be confident, creative, and possess strong judgment to adapt to the 

changing markets, products, and technology in the current business world. On the practical level, 

an individual’s personality is often a pre-cursor to one’s beliefs and attitudes, and a better 

understanding of the relationship between personality and attitudes known to predict 

entrepreneurial success can provide guidance for better training and mentoring young adults 

interested in entrepreneurship. 

Research has shown that 80% of would-be entrepreneurs in the U.S. are between the ages 

of 18-34, making this a very important group for the future success of the national economy 

(Kuratko, 2005). The constantly changing business environment, in both the U.S. and in the 

| 41 


global marketplace, will require the next generation of business professionals to utilize intellect, 

ingenuity, and forward thinking to develop appropriate strategies that capitalize on 

entrepreneurial opportunities. Future studies should continue to explore possible links between 

attitudes and personality in order to develop a more thorough entrepreneurial profile of the new 

generation of emerging entrepreneurs. In addition, to increase the generalizability of studies such 

as this, it is imperative that future samples of data be collected from current entrepreneurs so as 

to allow comparisons with would-be entrepreneurs and empirically formulate the proposed 

profile to b developed. This information can then be used to help better prepare them for the 

challenges of entrepreneurial growth and development. Ultimately a comprehensive model of 

“who” the entrepreneur is – one that combines individual differences (gender, nationality, 

education, prior exposure), psychological attributes (personality, attitudes), social attributes 

(social intelligence, social competence, support networks), and cognitive attributes (decision 

making styles, use of heuristics, information processing) – in a situational framework should be 

the goal of entrepreneurship research in academia. 

References 

Ajzen, I. (1991). The theory of planned behavior. Organizational Behavior & Decision 

Processes , 50, 179-211. 

Allen, I., Langowitz, N. & Minniti, M. (2007). Global Entrepreneurship Monitor 2006 Report on 

Women and Entrepreneurship . Babson Park, MA: Babson College. 

Amablie, T. M. (1983). The social psychology of creativity. New York: Springer. 

| 42 


attitude. (n.d.). WordNet® 3.0. Retrieved December 01, 2007, from Dictionary.com website: 

http://dictionary.reference.com/browse/attitude. 

Bandura, A. (1997). Self-Efficacy: The Exercise of Control. New York: W.H. Freeman & Co. 

Publishers. 

Baron, R. (2000). Psychological perspectives on entrepreneurship: Cognitive and social factors 

in entrepreneurs' success. Current Directions in Psychological Science, 9(1), 15-18. 

Bateman, T.S. & Grant, J.M. (1993). The proactive component of organizational behavior: A 

measure and correlates. Journal of Organizational Behavior, 14(2), 103-118. 

Bosma, N. & Harding, R. (2006). Global Entrepreneurship Monitor 2006 results report. Babson 

Park, MA: Babson College. 

Bohner, G. & Wanke, M. (2001). Attitudes and attitude change. Florence, KY: Psychology 

Press. 

Brockhaus, R. H. (1980). Risk-taking propensity of entrepreneurs. Proceedings of the Academy 

of Management , pp. 457–60. 

Brush, C.G. (1998). A resource perspective on women’s entrepreneurship: Research, relevance, 

and recognition. Proceedings of the OECD Conference on Women Entrepreneurs in Small 

and Medium Enterprises: A Major Force in Innovation and Job Creation . Paris, France. 


Burns, D. (2007). Toward an explanatory model of innovative behavior. Journal of Business & 

Psychology , 21(4), 461-488. 

Busenitz, L. W. & Arthurs, J. D. (2007). Cognition and capabilities in entrepreneurial ventures. 

| 43 


In J. R. Baum, M. Frese, R. Baron (eds) The Psychology of Entrepreneurship Research 

(pp. 131-150), Mahwah, NJ: Lawrence Erlbaum Associates. 

Busenitz, L. W., West, G. P., Sheppard, D., Nelson, T., Chandler, G. N. & Zacharakis, A. (2003). 

Entrepreneurship research in emergence: Past trends and future directions. Journal of 

Management, 29 (3), 285-308, 

Carraher, S. (2005). An Examination of entrepreneurial orientation: A validation study in 68 

countries in Africa, Asia, Europe, and North America. International Journal of Family 

Business , 2(1), 95-100. 

Carlson, S. D. (1985). Consistency of attitude components: A new approach for an old problem. 

Dissertation Abstracts International, 46(09B), 3261. 

Carter, S. (2000). Improving the numbers and performance of women-owned businesses: Some 

implications for training and advisory services. Education+Training, 42(4/5), 326-334. 

Carter, N. W., Gartner, W. B., Shaver, K. G. & Gatewood, E. J. (2003). The career reasons of 

nascent entrepreneurs. Journal of Business Venturing, 18(1), 13-39. 

Chaganti, R. & Parasuraman, S. (1996). A study of the impacts of gender on business 

performance and management patterns in small businesses. Entrepreneurship 

Theory & Practice, 21(2), 73-75. 

Chattopadhyay, R. & Ghosh, A. (2002). Predicting entrepreneurial success: A socio- 

psychological study. Journal of Entrepreneurship, 11(21), 22 – 31. 

Chen, C. C., Greene, P. G. & Crick, A. (1998). Does entrepreneurial self-efficacy distinguish 

| 44 


entrepreneurs from managers? Journal of Business Venturing, 13(4), 295-316. 

Coleman, S. (2002). Constraints faced by women small business owners: Evidence from the 

data. Journal of Developmental Entrepreneurship, 7(2), 151-174. 

Collins, C. J., Hanges, P., & Locke, E. A. (2004). The relationship of need for achievement to 

entrepreneurship: A meta-analysis. Human Performance, 17(1), 95-117. 

De Bono, E. (1996). Serious creativity. London: HarperCollins Business. 

Douglas, E. J. & Shepherd, D. A. (2002). Self-employment as a career choice: Attitudes, 

entrepreneurial intentions, and utility maximization. Entrepreneurship Theory & 

Practice , 26(3), 81-90. 

Ede, F. O., Panigrahi, B. & Calcich, S. E. (1998), African American students’ attitudes toward 

entrepreneurship educatio”, Journal of Education for Business, 73(5), 291-297. 

Engle, D. E., Mah, J. J. & Sadri, G. (1997). An empirical comparison of entrepreneurs and 

employees: Implications for innovation. Creativity Research Journal, 10(1), 45–49. 

Eisenberger, R. & Leonard, J. M. (1980). Effects of conceptual task difficulty on generalized 

persistence. American Journal of Psychology, 93, 285–298. 

Engle, D. E., Mah, J. J. & Sadri, G. (1997). An empirical comparison of entrepreneurs and 

employees: Implications for innovation. Creativity Research Journal, 10(1), 45–49. 

entrepreneur. (n.d.). The American Heritage® Dictionary of the English Language, Fourth 

Edition. Retrieved November 15, 2007, from Dictionary.com website: 

http://dictionary.reference.com/browse/entrepreneur. 

| 45 


Erickson, T. (2002). Entrepreneurial capital: The emerging venture’s most important asset and 

competitive advantage. Journal of Business Venturing, 17(3), 275-290. 

Farrell, G. (n.d.). Bo knows: You can't make an entrepreneur. USA Today, Retrieved September 

21, 2008, from Academic Search Premier database. 

Feldman, D. C. & Bolino, M. C. (2000). Career patterns of the self employed: Career 

motivations and career outcomes. Journal of Small Business Management, 38(3), 53-67. 

Feldman, D. C., Csikszentmihalyi, M. & Gardner, H. (1994). Changing the world: A framework 

for the study of creativity . Westport, CT: Praeger. 

Florin, J., Karri, R. & Rossiter, N. (2007). Fostering entrepreneurial drive in business 

education: An attitudinal approach. Journal of Management Education, 31(1), 17-42. 

Frazier, B. J. & Niehm, L. S. (2006). Predicting the entrepreneurial intentions of non-business 

majors: A preliminary investigation . Paper presented at the USASBE/SBI Conference, 

Tucson, AZ, January 14-17. 

Frese, M. & Rauch, A. (2000). Psychological approaches to entrepreneurial success: A general 

model and an overview of findings. In C.L. Cooper & I.T. Robertson (Eds.), International 

Review of Industrial and Organizational Psychology (Vol. 15, pp. 100 – 135). Chichester 

Sussex: Wiley & Sons. 

Gasse, Y. (1985). A strategy for the promotion and identification of potential entrepreneurs at the 

secondary school level. In J. A. Hornaday, B. Shils, J. A. Timmons, & K. H. Vesper (Eds.) 

Frontiers of Entrepreneurship (pp. 538-559). Wellesley, MA: Babson College. 

| 46 


task effort, and performance. Entrepreneurship Theory & Practice, 27(2), 187-206. 

Goldberg, L. R., Johnson, J. A., Eber, H. W., Hogan, R., Ashton, M. C., Cloninger, C. R. & 

Gough, H. C. (2006). The International Personality Item Pool and the future of public- 

domain personality measures. Journal of Research in Personality, 40, 84-96. 

Hansemark, O.C. (2003). Need for achievement, locus of control and the prediction of business 

start-ups: A longitudinal study. Journal of Economic Psychology, 24(3), 301-319. 

Harris, M. L. & Gibson, S. G. (2008). Examining the Entrepreneurial Attitudes of U.S. 

Business Students. Education + Training, 50(7), 568-581. 

Hisrich, R. D. & Brush, C. G. (1987). Women entrepreneurs: A longitudinal study. In R. 

Ronstadt, J. A. Hornaday, R. Peterson and K. H. Vesper (Eds.) Frontiers of 

Entrepreneurship (pp. 187-189), Wellesley, MA: Babson College. 

Hisrich, R. D., Langan-Fox, J. & Grant, S. L. (2007). Entrepreneurship research and practice: A 

call to action for psychology. American Psychologist, 62(6), 575-589. 

Hmieleski, K. M. & Corbett, A. C. (2006). Proclivity for improvisation as a predictor for 

entrepreneurial intentions. Journal of Small Business Management, 44(1), 45-63 

Jones, K. & Tullous, R. (2002). Behaviors of pre-venture entrepreneurs and perceptions of their 

financial needs. Journal of Small Business Management, 40(3), 233-249. 

Kickul, J. & D’Intino, R. (2005). Measure for measure: Modeling entrepreneurial self-efficacy 

onto instrumental tasks within the new venture creation process. New England Journal of 

Entrepreneurship , 8(2), 39 – 47. 

| 47 


Kourilsky, M.L. & Walstad, W. B. (1998). Entrepreneurship and female youth: Knowledge, 

attitudes, gender differences, and educational practices. Journal of Business Venturing, 

13(1), 77-88. 

Krueger, N. (1993). The impact of prior entrepreneurial exposure on perceptions of new venture 

feasibility and desirability. Entrepreneurship Theory & Practice, 18(1), 5-21. 

Krueger, N. & Brazeal, D. (1994). Entrepreneurial potential and potential entrepreneurs. 

Entrepreneurship Theory & Practice, 18(3), 91-94. 

Kuratko, D. (2005). The emergence of entrepreneurship education: Developments, trends, and 

challenges. Entrepreneurship Theory & Practice, 29(5), 577-597. 

Learned, K. E. (1992). What happened before the organization? A model of organization 

formation. Entrepreneurship: Theory and Practice, 17(1), 39–48. 

Locke, E. & Baum, J. (2007). Entrepreneurial Motivation. The psychology of entrepreneurship 

(pp. 93-112). Mahwah, NJ, US: Lawrence Erlbaum Associates Publishers. Retrieved 

September 21, 2008, from PsycINFO database. 

Louis, M. R. & Sutton, R. I. (1991). Switching cognitive gears: From habits of mind to active 

thinking. Human Relations, 44, 55–76. 

Markman, G. D., Baron, R. A. &. Balkin, D. B.. (2005). Are perseverance and self-efficacy 

costless? Assessing entrepreneurs' regretful thinking. Journal of Organizational 

Behavior , 26(1), 1-19. 

Markman, G. (2007). Entrepreneurs' Competencies. The psychology of entrepreneurship (pp. 67- 

| 48 


92). Mahwah, NJ, US: Lawrence Erlbaum Associates Publishers. Retrieved September 

21, 2008, from PsycINFO database. 

Marlow, S. & Patton, D. (2005). All credit to men? Entrepreneurship, finance, and gender. 

Entrepreneurship Theory and Practice, 29(6), 717-735. 

Matthews, C. H. & Moser, S. B. (1995). Family background and gender: Implications for interest 

in small firm ownership. Entrepreneurship & Regional Development, 7, 365-377. 

McClelland, D. C. (1961). The achieving society. New York: Van Nostrand. 

McMullen, J.S. & Shepherd, D.A. (2006). Entrepreneurial action and the role of uncertainty in 

the theory of the entrepreneur. Academy of Management Review, 31(1), 132-152. 

Miner, J. B. & Raju, N. S. (2004) Risk Propensity Differences Between Managers and 

Entrepreneurs and Between Low- and High-Growth Entrepreneurs: A Reply in a More 

Conservative Vein, Journal of Applied Psychology, 89(1), 3–13. 

Minniti, M. Bygrave, W. D. & Autio, E. (2005). Global Entrepreneurship Monitor 2005 

executive report . Babson Park, MA: Babson College. 

Mitra, J., & Matlay, H. (2004). Entrepreneurial and vocational education and training: Lessons 

from eastern and central Europe . Industry and Higher Education, 18(1), 53-69. 

Mittelstaedt, R. A., Grossbart, S. L., Curtis, W. W., & DeVere, S. P. (1976). Optimum stimulation 

level and the adoption decision process. Journal of Consumer Research, 3, 84–94. 

Palich, L. E. & Bagby, D. R. (1995). Using cognitive theory to explain entrepreneurial risk 

taking: Challenging conventional wisdom. Journal of Business Venturing, 10(6), 425- 

| 49 


438. 

Patchen, M. (1965). Some questionnaire measures of employee motivation and morale. An 

Arbor: Institute of Social Research, University of Michigan. 

Potts, H. W. W. & Wardle, J. (1998). The list heuristic for studying personality correlates of food 

choice behavior. A review and results from two samples. Appetite, 30, 79-92. 

Rauch, A. & Frese, M. (2007a). Let’s put the person back into entrepreneurship research: A 

meta-analysis on the research between business owners’ personality traits, business 

creation and success. European Journal of Work and Organizational Psychology, 16(4), 

353-385. 

Rauch, A. & Frese, M. (2007b). Born to be an entrepreneur? Revisiting the personality approach 

to entrepreneurship, in J. R. Baum, M. Frese, R. Baron (eds) The Psychology of 

Entrepreneurship Research , pp. 41-65. Mahwah, NJ: Lawrence Erlbaum Associates. 

Reynolds, P. D. & White, S. B. (1997). The entrepreneurial process: Economic growth, 

men, women, and minorities . Westport, CT: Quorum Books. 

Robb, A. M. (2002). Entrepreneurial performance by women and minorities: The case for new 

firms. Journal of Developmental Entrepreneurship, 7(4), 383-397. 

Robinson, P. B. (1987). Prediction of entrepreneurship based on attitude consistency model. 

Dissertation Abstracts International, 48, 2807B. 

Robinson, P. B., Stimpson, D. V., Huefner, J. C. & Hunt, H. K. (1991). An attitude approach to 

the prediction of entrepreneurship. Entrepreneurship Theory & Practice, 15(4), 13-31. 

| 50 


Rotter, J. B. (1966). Generalized expectations for internal vs. external locus of reinforcement. 

Psychological Monographs, LXXX-1. 

Schumpeter, J. A. (1935). Theory of economic development. Muchen: Von Duncker Und 

Humbolt. 

Schumpeter, J. A. (1976). Capitalism, socialism, and democracy. New York: Harper and 

Brothers. (Original work published 1942). 

Sexton, D. L. & Bowman, N. B. (1983) Comparative Entrepreneurship Characteristics of 

Students: Preliminary Results, in J. Hornaday, J. Timmons and K. Vesper (eds) Frontiers 

of Entrepreneurship Research , pp. 213–25. Wellesley, MA: Babson College. 

Sexton, D. L. & Bowman, N. B. (1984) Personality Inventory for Potential Entrepreneurs: 

Evaluation of a Modified JPI/PRF–E Test Instrument, in J. Hornaday, F. Tarpley, J. 

Timmons and K. Vesper (eds) Frontiers of Entrepreneurship Research, pp. 513–28. 

Wellesley, MA: Babson College. 

Shane, S. (2003). A general theory of entrepreneurship: The individual-opportunity nexus. 

Cheltenham, England: Edward Elgar. 

Shapero, A. & Sokol, L. (1982). Social dimensions of entrepreneurship. In C. A. Kent, D. L. 

Sexton & K. H. Vesper (eds.), Encyclopedia of Entrepreneurship, pp. 72-90, Englewood 

Cliffs, NJ: Prentice Hall. 

Shaw, E., Carter, S. & Brierton, J. (2001). Unequal entrepreneurs: Why female enterprise is an 

uphill business . London: The Industrial Society. 

| 51 


Shook, C., Priem, R. & McGee, J. (2003). Venture creation and enterprising individual: A 

Review and Synthesis. Journal of Management, 29 (3), 379-399. 

Slater, M. D. (2003). Alienation, aggression, and sensation seeking as predictors of adolescent 

use of violent film, computer, and website content. Journal of Communication, 53, 105- 

121. 

Sternberg, R. J. (2004). Successful intelligence as a basis for entrepreneurship. Journal of 

Business Venturing , 19(2), 189-202. 

Stewart, W. H. & Roth, P. (2001) ‘Risk Propensity Differences Between Entrepreneurs and 

Managers: A Meta-Analytic Review’, Journal of Applied Psychology, 86(1): 145–53. 

Steward, W. H., Watson, W. E., Carland, J. C. & Carland, J. W. (1999). A proclivity for 

entrepreneurship: A comparison of entrepreneurs, small business owners, and corporate 

managers. Journal of Business Venturing, 14(2), 189-214. 

Stoltz, P. G. (1997). Adversity quotient: Turning obstacles into opportunities. New York: Wiley. 

Thomas, P. (2001). Women entrepreneurs opt for equity ahead of growth. Wall 

Street Journal , p. B2. 

Thompson, J. L. (2004). Innovation through people. Management Decision, 42(9), 1082-1094. 

Van Trijp, H. C. M. (1995). Variety seeking in product choice behavior. Wageningen, 

Netherlands: Wageningen Agricultural University. 

Verheul, I. & Thurik, R. (2001). Start-up capital: Does gender matter? Small Business 

Economics , 16(4), 329-345. 

| 52 


Walsh, J. P. (1995). Managerial and organizational cognition: Notes from a trip down memory lane. 

Organization Science, 6, 280–321. 

| 53 


Development of A Revenue Management Checklist 

Jeff Shields 


Portland, ME 04104 

Email: jshields@usm.maine.edu 

Joyce Shelleman 


Portland, ME 04104 

Email: jshelleman@usm.maine.edu 

| 54 


Biographical 

Jeff Shields is an Associate Professor at the University of Southern Maine. He holds a 

Ph.D. in Business Administration from the University of Pittsburgh, an MBA from the University 

of Pittsburgh, and a B.S. in Psychology from Washington State University. His research interests 

are management control systems, performance measurement, revenue management, and the use 

of management accounting information by entrepreneurs and small businesses. 

Joyce Shelleman is Adjunct Lecturer in the School of Business at the University of 

Southern Maine and independently counsels small business owners and professionals on 

leadership issues. Her Ph.D. in Business Administration is from the University of Pittsburgh. 

Her current research interests are in rural entrepreneurship and small business. 

Abstract 

This paper develops a checklist for use by small business managers to support revenue 

management strategy. Based on the revenue management literature and a study of small 

businesses, the checklist scales measuring major dimensions of revenue management are 

examined for evidence of construct validity. The findings suggest that the checklist scales are 

valid measures of small business revenue management practice, with support provided for both 

their internal and external validity. Results offer small business managers a simple, readily 

applicable and valid checklist to measure key variables essential to the planning, implementation, 

and evaluation of their revenue management strategy. 

| 55 


Development of a Revenue Management Checklist 

Businesses seek to optimize revenues by practicing revenue management. Revenue management, sometimes called yield management (Boyd 

& Bilegan, 2003), focuses on inventory and product/service availability in tandem with dynamic pricing decisions. Its use has gradually spread 

from large businesses in industries such as transportation, hotels, and retailing (Talluri & Van Ryzing, 2004) to small businesses. In fact, small 

businesses may find that revenue management can assist them in competing with larger firms (Gold,1964; Pineda et al., 1998; Smeltzer, Fann, & 

Nikolaisen, 1988; Weinrauch et al., 1991) given its positive effects on sales revenue in small businesses 

(Shields, 2006). Many small businesses, however, lack the sophisticated technology, staff, and other resources that might facilitate more 

widespread application of known revenue management strategies. A methodology such as a checklist, that tracks and manages the most critical 

information required for maintenance of a simple revenue management system, could enable even micro-businesses to take advantage of the potential 

revenue benefits to be derived from revenue management. A checklist allows for the organization of information and systematic review of progress 

toward a goal while requiring a minimum of resources to be devoted to its application and upkeep. Many of the large public accounting firms use 

decision aids such as a checklists in audits where their use has been shown to produce audit results that are more effective, efficient, and consistent 

(McDaniel, 1990). 

1Shields (2006) investigated the use of revenue management in small businesses and its effects on sales revenue, revealing practices most 

commonly employed and the extent to which they are used. Building on the findings from this prior research , the purpose of this paper is to 

present a valid revenue management checklist that can be employed in practice by small businesses to plan, implement, and evaluate a revenue 

management strategy. Its results will offer small business managers a simple, readily applicable and valid checklist grounded in empirical 

evidence to measure key variables essential to their revenue management strategy. The overriding concern of measurement is validity or the 

degree to which “empirical evidence and theoretical rationales support … the inferences and actions” taken as a result (Messick, 1989, p. 13). 

Small businesses, often facing limited resources and time, may take significant actions based on the results of checklists and similar measures; 

therefore, it is incumbent on small business consultants and others who develop and advocate such instruments to seek to ensure their validity. 

The next section presents a review of literature on the major constructs associated with revenue management practice. This is 

followed by development of the checklist, including methods and results; discussion of its validity; implications; and conclusions. 

Review of the Literature 

Revenue management practices have been associated with increased sales and related 

outcomes in both large and small businesses. Some airlines have seen revenues increase by 

seven percent as a result of revenue management applications (Marmorstein et. al., 2003). In 

prominent examples of well-known companies, Marriott estimates that revenue management 

added $150 million to $200 million to sales of $10 billion in 1996 and added $400 million in 

1998 (Marriott & Cross, 1997; Tomplin, 1999) while National Rental Car attributes a $54 million 

turnaround in its revenues to implementing a revenue management system (Geraghty & Johnson, 

1997). Higher revenue also has been reported in small rural businesses (Shields, 2006) and 

revenue management practices are associated with related outcome measures that enable the 

| 56 


generation of higher revenues in small business restaurants (Shields and Shelleman, 2008). 

Revenue management is commonly viewed as “...selling the right product to the right 

customer at the right time for the right price” (Smith et al., 1992). In more technical terms, it 

has been characterized as a process dealing with acceptance and refusal of orders by employing 

differential pricing strategies and stop sales tactics to: 1) reallocate capacity, 2) enhance the 

reliability and speed of product or service delivery, and 3) realize revenue from change order 

responsiveness (Harris & Pinder, 1995). 

The practice of revenue management is employed in a broad spectrum of industries (e.g., 

banking, broadcasting, electric utilities, healthcare, hospitality, printing, telecommunications, and 

transportation) (Secomandi, Abbott, Atan, & Boyd, 2002). Because most of its history has been 

in large businesses, the bulk of the literature on its use is concentrated there and our review of the 

revenue management literature and examples of practice are, of necessity, drawn from these 

limited sources. 

Three characteristics are associated with companies that first used revenue management: 

1) perishable products; 

2) high fixed costs in the form of capacity costs; and 

3) the ability to segment customers (Weatherford & Bodily, 1992). 

For example, airlines have a perishable product, (i.e., a given flight on a given date to a given 

destination flies only once), high fixed costs in their investment in fleets of planes, and 

reservation systems that allow them to track and record data on the characteristics of their 

customers’ shopping and buying profiles. Data from the reservations systems allows airlines to 

| 57 


segment their customers into groupings such as leisure and business travelers. With these 

empirically derived categories, the companies can predict the demand for specific flights and 

adjust fares and seat availability to maximize revenues across segments. In order to make them 

available for business travelers who are traveling at the last minute, seats are withheld for up to a 

few hours before a flight. Business travelers are willing to pay more for those seats than leisure 

travelers who may have reserved seats many weeks earlier, with the net result of more revenues 

generated for the airline. 

Businesses can practice and benefit from revenue management with only some of the trademark characteristics in place. Many small 

businesses have limited capacity for providing products and services (e.g., taking orders, shipping, serving customers). Capacity is perishable in the 

sense that a business spends only a limited sum over a fixed period of time to acquire and transform resources to produce sales (Elimam & Dodin, 2001). 

Thus, based on capacity limits, revenue management is appropriate for adoption and practice in even very small businesses. 

Revenue management practices can be broken into four main elements or categories: 1) 

tracking customers’ demand for products and services by accessing and recording data; 2) 

segmenting customers by analyzing those data; 3) targeting customers according to their 

differential demand and using the demand information to limit supply; 4) pricing according to 

each segment’s willingness to pay (Cross, 1997; Talluri & Van Ryzin, 2004; Weigand, 1999). 

Tracking 

The process begins with tracking customers’ demand. Customer demand for products 

and services is tracked with the use of reservation and data warehouse systems (Berman, 2005; 

Graham, 1998; Talluri & Van Ryzin, 2004). Tracking customer data with regard to demand, 

shopping, and buying is facilitated by technologies such as ATM machines, debit cards, point-of- 

sale scanners (barcodes), websites, and reservation systems. Where available, such systems offer 

companies an accessible source of customer data. 

Analysis 

| 58 


After customer data are collected, a second element of revenue management practice is 

the analysis of the data gathered, followed by identification of customer segments (Talluri & Van 

Ryzin, 2004). Information on profitability and patterns of differential demand become apparent 

through analysis (Talluri & Van Ryzin, 2004). By segmenting customers into groups based on 

their preferences, businesses can discover differences in willingness to pay. These differences 

can then be exploited to increase revenue (Weigand, 1999). Criteria for segmentation often vary 

by industry. For example, in a hotel, customers may be segmented by the number of nights they 

stay (e.g., one night versus several nights) and by room type (e.g., number of beds) (Talluri & 

Van Ryzin, 2004). 

Targeting 

Targeting customers according to their differential demand and limiting supply by 

demand is the third major element of revenue management. Information on differential demand 

can be applied to design new products and services to target specific customer segments’ needs 

(Talluri & Van Ryzin, 2004). For example, banks use data mining to build models to identify 

customer segments and then to identify those customers who are most likely to purchase new 

product offerings (Hormozi & Giles, 2004). The ability to alter supply by customer segments 

according to forecasts of demand is another area important to effective revenue management 

(Geraghty & Johnson, 1997). Limiting supply by demand involves using inventory controls. 

For example, hotels manage their inventory of rooms by length of stay so that typically 

customers wanting to stay one night during peak mid-week times have fewer rooms available for 

reservations than those wanting to stay multiple nights (Marriott & Cross, 1997). 

| 59 


Pricing 

The fourth major element of revenue management practice is pricing according to each 

customer segment’s willingness to pay (i.e., demand). Applying inventory controls to limit 

supply according to demand across customer segments reserves supply for the customer 

segments who are willing to pay more (McGill & Van Ryzin, 1999). An example of this practice 

can be seen in Marriott’s use of daily demand forecasts to adjust the rates on 160,000 hotel 

rooms in Marriott, Courtyard, and Residence Inns according to length of stay and length of 

advance purchase (Marriott & Cross, 1997). 

Rather than altering capital investment, pricing can be used to bring demand and supply 

into balance as well (Weigand, 1999). For example, rental car companies often reduce prices on 

weekends in locations with many business travelers on weekdays (Gearghty & Johnson, 1997). 

Similarly, delivery businesses balance supply and demand during peak demand times (e.g., 

holiday gift-giving times) by raising rates instead of pursuing more costly options such as adding 

capacity (Weigand, 1999). In fact, in many settings, prices tend to be increased during busy 

periods (e.g., a restaurant’s dinner periods on Fridays and Saturdays) and decreased during slow 

times in order to shift price sensitive customers from periods of high demand to periods of low 

demand (Cross, 1997). 

These four primary elements of revenue management practice identified in the literature 

formed the basis for the development of the Revenue Management Checklist. Development of 

the checklist is discussed in the following section of the paper. 

Development of the Checklist 

| 60 


The validity of an instrument such as a checklist to assess revenue management practices is a consideration to ensure that key variables are not 

missed or that time and effort are not wasted collecting and analyzing data that aren’t relevant to the issue at hand. When a construct like revenue 

management is translated into a questionnaire or checklist, implicit assumptions are made about its meaning or domain. The instrument 

development process tests those assumptions. This examination of construct validity eventually takes place over time with consideration of 

evidence relative to content (substantive component), the internal structure of the measure (structural component), and its relation to outside 

variables (external component) (Loevinger, 1957) as the measure is used and results recorded. The purpose of the present study was to examine 

and to provide preliminary evidence of validity that would facilitate its translation to practice so that small business managers might experience 

immediate benefit. 

The substantive and structural elements, concerned with internal validity, occurred with the development of potential checklist items based 

on the literature review and the subsequent statistical analysis of the empirical data that produced internally consistent groupings of checklist 

items, i.e., scales. The last element, addressing external validity, was addressed by examination of correlations and regression analysis that 

explored the relationship between revenue management practices and sales revenue in small businesses. 

The four elements of revenue management practice discussed in the literature review 

formed the basis for the development of the checklist. Items for the measures were generated 

from the literature and the wording was adapted as necessary to be applicable to small 

businesses. Response categories were on seven-point Likert-type scales, ranging from Strongly 

Agree to Strongly Disagree. 

Data were collected from 87 small businesses using a semi-structured questionnaire 

format administered by mail. Respondents’ annual sales averaged $1,214,447, ranging from 

$6,000 to $9,300,000, with an average of 10 employees. Thirty-six percent of the businesses 

were service, 24% were manufacturing, 23% were retail, 11% were multiple business types, 5% 

were construction, and 1 % were wholesale. Slightly over half of the respondents were female 

(54%). 

Following the development of questionnaire items and administration of the 

questionnaire, item responses were subjected to principal component factor analysis, using an 

Oblimin rotation with Eigen values greater than one, in order to confirm groups of interrelated 

items comprising scales. Items included for a factor loaded at .50 or greater on that factor. After 

refinement, Cronbach’s alpha was used to assess the internal reliability of the final scales. 

Gathering Information from Customers 

| 61 


For the revenue management practice element that addresses accessing data or gathering 

customer information, respondents were asked, “To what extent do you use the following 

methods to gather information from your customers?” The items were factor analyzed using 

Principle Components with Oblimin rotation to examine common variance. A three-factor 

solution that explained 64 percent of the variance emerged; however, when Cronbach’s alphas 

were run on each of these scales only the first factor had an acceptable reliability score 

(Nunnally, 1978). This scale, Gathering Information, has three items as shown in the Appendix. 

Recording Information about Customers 

To assess the revenue management element of recording information or data about 

customers, respondents were asked, “To what extent do you record the following information 

about your customers?”. A three-factor solution that explained 64% of the variance emerged 

from the factor analysis. This resulted in three scales that addressed recording information: 

Record Basic Data, Record Shopping Data and Record Profitability Data (see Appendix for 

items). The Cronbach's alphas on all three scales were acceptable (see Table 1) (Nunnally, 1978). 

Analyzing Information 

With regard to the practice element of analyzing customer data, respondents were asked, 

“To what extent do you do the following with customer information?”. These responses resulted 

in a two-factor solution that explained 72% of the variance. The factors were labeled Segment 

and Analyze and Take Action. The resulting scales (see Appendix for items) demonstrated 

acceptable Cronbach’s alphas (see Table 1) (Nunnally, 1978). 

Responding and Adapting to Customers 

| 62 


With regard to the revenue management practice element that addressed targeting and 

pricing in order to respond and adapt to customers, respondents were asked, “To what extent do 

you do the following to adapt to your customers?” Factor analysis resulted in a two-factor 

solution that explained 60% of the variance with scales called Target Products/Services and Price 

Dynamically (see Appendix for items). The scales showed acceptable Cronbach’s alphas (see 

Table 1) (Nunnally, 1978). 

| 63 


To examine relationships among the scales, Pearson correlations were run. As shown in 

Table 2, results demonstrated positive correlations among them, many of which were statistically 

significant. In addition, correlations were examined between the checklist scales and a 

dependent variable, sales revenue, that theory suggests is associated with these constructs. 

Likewise shown in Table 2, the checklist scales demonstrated correlations with average monthly 

| 64 


sales as predicted by theory. 

Although the correlations shown in Table 2 suggest relationships among the variables, 

multiple regression was employed to estimate how well the presumed antecedent revenue 

management practice factors explain variance in the consequent variable of interest, sales 

revenues. The checklist scales measuring the elements of revenue management practice were the 

independent variables and monthly sales revenue for 2000 was the dependent variable in the 

regression model. As shown in Table 3, the model was significant ( F = 2.73, p = 01) with an 

Adjusted R 2 of 16. 

| 65 


Discussion 

Results of the administration of the questionnaire measuring revenue management 

practices in small businesses suggest that the Checklist scales are valid measures. The scales 

map to the four elements of revenue management practice identified in the literature as follows. 

Gathering Information from Customers (one scale) and Recording Information about Customers 

| 66 


(three scales) address the domain of the first element, tracking customers’ demand for products 

and services by accessing and recording data. Analyzing Information (two scales) addresses the 

domain of the second element, segmenting customers by analyzing those data. The third element 

of revenue management practice, targeting customers according to their differential demand and 

using the demand information to limit supply, is tapped by Target (one scale) in the category 

Responding and Adapting to Customers. Pricing (one scale) in the category Responding and 

Adapting to Customers addresses the domain of the fourth element, pricing according to each 

segment’s willingness to pay. These results showing that the data collected from small business 

managers in response to the scales were confirmed by statistical factor analysis showing distinct 

dimensions of items suggest that the measure demonstrates substantive validity. 

Acceptable internal reliability coefficients, i.e., Cronbach’s alpha, provided preliminary 

evidence of the internal structure of the scales, suggesting that they are structurally valid 

measures of the elements of revenue management. Pearson correlations and regression analysis 

that examined the predictive effects of the revenue management practices on reported sales offers 

evidence that the measures also demonstrate the external component of validity by relating to 

other variables in ways predicted by theory. In sum, the questionnaire scales that form the 

Revenue Management Checklist appear to represent a measure of revenue management practice 

in small business settings that demonstrates construct validity, including its substantive, 

structural, and external facets (Loevinger, 1957). 

Implications 

The Revenue Management Checklist developed in this study offers a practical, 

| 67 


inexpensive, and readily applicable tool that can provide the basis for a systematic program to 

initiate or extend revenue management strategy. It can alert managers to needed changes to their 

existing operations as well as enable them to better understand the relationship between existing 

practices and revenue management potential. Identified revenue-advantageous modifications to 

operations can then be incorporated into the overall revenue management strategy. 

For ease of administration, the Checklist can be used as a pencil and paper inventory as 

shown in the Appendix or it can be automated. An automated version is under development by 

the authors to offer small business managers the ability to administer the Checklist to multiple 

employees (e.g., leaders of different product/service lines, locations, etc.) and tabulate their 

responses quickly at minimal cost. 

The first four categories in the Checklist address gathering and recording information 

about customers. How complete is the existing information that the business routinely gathers 

about its customers? This can be assessed by filling out the Checklist items for these initial four 

groups of items. For example, under Part II, Record Profitability Data, a manager should ask, 

“Are there gaps, such as “Annual dollar purchases?” In this case, the gap can be filled by 

recording transactions properly. Software such as Quicken/QuickBooks has features that 

include categories, memos, and tags that can be used to generate a report on annual purchases. 

The Checklist should stimulate the manager to develop a procedure when he or she uses the 

software that makes the information available for report generation. Customer Relationship 

Management software, QuickBooks, or Quicken can be employed to systematically record and 

expand the information base a business has on its customers. Together Part I, Gathering 

Information from Customers, and Part II, Recording Information about Customers, identify the 

| 68 


necessary information set that a business should build as part of a revenue management program. 

Once a business has Parts I and II of the Checklist in place, i.e., is systematically 

recording relevant customer information, the business then is in a position to address Parts III 

and IV. In Part III of the Checklist, the Segment items signal the need to establish categories of 

customers. These categories should be based on common differentiators among customers that 

are relevant to that business such as demographics (e.g., age, gender, income) or behavioral- 

based characteristics (e.g., product use, purchase frequency, convenience, shopping behaviors). 

Once categories have been created, then the small business manager needs to decide on the 

importance of the groupings based on factors such as the number of customers in or sales 

revenues generated by each category. Once this is accomplished, then the information associated 

with more revenue-critical segments can be analyzed. Relevant information might include items 

such as these customers’ frequency of purchase, SKUs purchased, products desired but not 

available (i.e., stock outs, products not stocked), services desired but not available, and 

complaints. 

In Part III, the category Analyze and Take Action guides the process that the manager 

should take after segmenting customers and the process to follow in taking action by both 

targeting products/services and pricing for revenue management. Continuing a sequential flow 

through the Checklist, the outcome of completing Part III of the Checklist, Analyzing 

Information, will suggest actions addressed in Part IV of the Checklist, Responding and 

Adapting to Customers. 

The section, Target Products and Services, suggests to the manager to take actions to 

| 69 


target products and services for a specific customer segment. For example, in response to 

feedback from a revenue-critical customer segment about products that are not stocked or 

available, the manager may wish to expand his or her product line. 

Additional actions in a revenue management strategy might be prompted under Part IV, 

Price Dynamically. Analysis of busy and slow periods might suggest pricing policies such as 

discounting during slow periods (e.g., hour of day, day of week, quarter of the year). Further, 

this section prompts a manager to price differently for different customer segments, such as, for 

example, structuring and offering tiered services. Tiered services allow the customer to choose 

the level of service for which they are willing to pay. For example, a florist might offer flowers 

on a cash and carry basis; bouquets with ribbons; bouquets with ribbons and a card; bouquets 

with ribbons, card, and delivered; or bouquets with ribbons, card, and delivery at a specific date 

and time. 

The Checklist can be applied for three phases of a revenue management strategy and 

program in small businesses: 1) to plan a program and set goals, 2) to guide implementation, and 

3) to evaluate an existing program. The use of the Checklist in a cycle of goal setting, guiding, 

and evaluating provides a systematic implementation of a revenue management strategy for 

small businesses that is both efficient and effective. 

Conclusion 

In conclusion, this paper presents empirical evidence that supports the internal and 

external validity of the Revenue Management Checklist. The validated Checklist offers small 

business managers a simple, inexpensive tool that they can employ with confidence to initiate 

and manage their revenue management strategy. 

| 70 


References 

Berman, B. (2005). Applying Yield Management Pricing to Your Service Business. Business 

Horizons, 48, 169-179. 

Boyd E. A. & Bilegan, I. C. (2003). Revenue management and e-commerce. Management 

Science, 49(10), 1363-1386. 

Cross, R. (1997). Revenue Management: Hard-Core Tactics for Market Domination New York: 

Broadway Books. 

Elimam, A.A. & Dodin, B.M. (2001). Incentives and Yield Management in Improving 

Productivity of Manufacturing Facilities. IIE Transactions, 33, 449-462. 

Geraghty, M.K. & Johnson, E. (1997). Revenue Management Saves National Car Rental. 

Interfaces, (January-February), 107-127. 

Gold, R.A. (1964). Practical Planning for Small Business. Harvard Business Review, 42(3), 

147-162. 

Graham, A.B. (1998). All for One and One for All. Forbes, (September), 24-28. 

Harris, F. & Pinder, J. (1995). A Revenue Management Approach to Demand Management 

and Order Booking in Assemble-To- Order Manufacturing. Journal of Operations 

Management,13, 299-309. 

Hormozi, A.M. & Giles, S. (2004). Data mining: A Competitive Weapon for Banking and Retail 

Industries. Information Systems Management, (Spring), 62-71. 

Loevinger, J. (1957). Objective Tests as Instruments of Psychological Theory. Psychological 

Reports, (Monograph No. 9), (3), 635-694. 

Marmorstein, H., Rossomme, J., & Sarel, D. (2003). Unleashing the Power of Yield 

Management in the Internet Era: Opportunities and Challenges. California Management 

Review, 45(3), 147-167. 

Marriott, J. Jr. & Cross, R. (1997). Room at the Revenue Inn. Chief Executive, (July), 54-57. 

McDaniel, L. (1990) The Effects of Time Pressure and Audit Program Structure on Audit 

Performance. Journal of Accounting Research, 28(2), 267-285. 

McGill, J.I., & Van Ryzin, J.G. (1999). Revenue Management: Research Overview and 

Prospects. Transportation Sciences, 33(2), 233-256. 

Messick, S. (1989). Validity. In R.L. Linn (Ed.), Educational Measurement (3 rd Ed.). New York: 

American Council on Education and Macmillan Publishing Co., 13-104. 

| 71 


Nunnally, J.C. (1978). Psychometric Theory (2 nd ed.). New York: McGraw-Hill. 

Pineda, R.C., Lerner, L.D., Miller, M., & Phillips, S.J. (1998). An Investigation of Factors 

Affecting the Information-Search Activities of Small Business Manager. Journal of Small 

Business Management, (January), 60-71. 

Secomandi, N., Abbott, K., Atan, T., & Boyd, E.A. (2002). From Revenue Management 

Concepts to Software Systems. Interfaces, 32(2), 1-11. 

Shields, J. (2006). Revenue Management: A Strategy for Increasing Sales Revenue in Small 

Businesses. Journal of Small Business Strategy, 16 (2), 43-53. 

Shields, J. and Shelleman, J. (2008). Restaurant Revenue Management Practice. Journal of 

Applied Management and Entrepreneurship, 12(4), 47-63. 

Smelter, L.R., Fann, G.L., & Nikolaisen, V.N. (1988). Environmental Scanning Practices in 

Small Business. Journal of Small Business Management, (July), 55-62. 

Smith, B.C., Leimkuhler, J.F., & Darro, R.M. (1992). Yield Management at American Airlines 

Interfaces, 22(1), 8-31. 

Talluri, K.T. & Van Ryzin, J.G. (2004). The Theory and Practice of Revenue Management. New 

York: Springer Science+Business Media Inc. 

Tomplin, N. (1999). Property Report: Your Room Costs $250…No! $200… No… . Wall Street 

Journal, (May 5), p. B1. 

Weatherford, L. and Bodily, S. (1992). A Taxonomy and Research Overview of 

Perishable-Asset Revenue Management: Yield Management, Overbooking, and 

Pricing. Operations Research, (September-October), 831-844. 

Weigand, R.E. (1999) Yield Management: Filling the Buckets, Papering the House. Business 

Horizons, (September-October), 55-64. 

Weinrauch, J.D., Mann, O.K., Robinson, P.A., & Pharr, J. (1991). Dealing with Limited 

Financial Resources: A Marketing Challenge for Small Firms. Journal of Small Business 

Management, (October), 44-54. 

| 72 


Footnote 

1 The data and statistics employed for this study are drawn from Shields, 2006. 

| 73 


Appendix 

The Revenue Management Checklist 

Introduction 

The Revenue Management Checklist inventories and tracks your revenue management strategy. 

Revenue management is the process of matching your products and services to your specific 

customers to both better serve them and at the same time to maximize your sales revenue. 

By using this checklist, you will identify gaps in your current practices. This information will 

allow you to take timely corrective actions and expand your procedures to more directly affect 

revenue. The checklist also will help you to identify appropriate goals for your operations. 

Frequent monitoring will enable you to adjust goals and implementation strategies as you 

become more adept at revenue management, your competitive environment changes, and your 

business grows. 

Directions 

On the following pages are items describing actions that small businesses often take to 

implement a revenue management strategy. For each item, simply use the checkbox to indicate 

with a check (√) if you currently are engaged in that activity on a regular basis. 

| 74 



Part I. Gathering Information from Customers 

Indicate whether you use the following methods regularly to gather information from your 

customers. 

Gather Information 

Email from customers 

Letters from customers 

Telephone calls from customers 

Part II. Recording Information about Customers 

Indicate whether you regularly record the following information. 

Record Basic Customer Data 

Customer name 

Email address 

Mailing address 

Telephone number 

Record Shopping Data 

Complaints 

Compliments 

Frequency of purchases 

Number of purchases 

Product/services wanted but not available at the time 

Products/services wanted but not provided 

Returns 


Part II. Recording Information about Customers 

Record Profitability Data 

Annual dollar purchases 

Customer specific costs 

Demographics 

Least preferred product/service features 

Most preferred product/service features 

Profitability 

| 75 


Part III. Analyzing Information 

Indicate whether you regularly do the following with customer information. 

Segment 

Group customers into categories 

Count the number of customers in each category 

Analyze information by category 

Weigh the importance of categories 

Analyze and Take Action 

Review the information 

Set goals 

Take actions based on analysis 

Track trends 

| 76 



Part IV. Responding and Adapting to Customers 

Indicate whether you regularly do the following to adapt to your customers. 

Target Products and Services 

Price Dynamically 

Provide better services to more profitable customers 

Set aside products/services for last minute customers for a premium price 

Target specific products/services to certain customers and/or segments of customers 

Discount prices during slow periods 

Mark up prices during busy periods 

Price products/services differently for different customer segments 

| 77 


INNOVATION: THE SOUL OF ENTREPRENEURSHIP 

JoAnn C. Carland 

Carland College 

North Carolina (online) 

Email: jimandjoann@thedrscarland.com 

James W. Carland 

Carland College 

North Carolina (online) 

Email: jimandjoann@thedrscarland.com 

| 78 


ABSTRACT 

Innovation of some type is a hallmark of the entrepreneurial psyche. Research has 

indicated that it is a characteristic of the entrepreneur. This treatise indicates how to create an 

environment conducive to innovation and indicates that sometimes only psychic rewards are 

gained through its endeavor. However, some element of innovation is necessary for survival. 

INTRODUCTION 

Innovation is the Soul of Entrepreneurship. How dare we make this assertion you may 

ask? Aristotle defined the soul “as the core essence of a being” (Soul, 2007) and that is how we 

feel about the essence of entrepreneurship: innovation truly is an economic engine, the vital 

essence of true entrepreneurship. 

Innovation typically involves creativity, but is not identical to it: innovation involves 

acting on a creative idea to make some specific and tangible difference in the domain in which 

the innovation occurs (Amabile, Conti, Coon, Lazenby & Herron, 1996). Amabile et al. (1996) 

proposed the following definition: 

"All innovation begins with creative ideas . . . We define innovation as the 

successful implementation of creative ideas within an organization. In this view, 

creativity by individuals and teams is a starting point for innovation; the first is a 

necessary but not sufficient condition for the second." 

In our view, innovation is the tangible expression of creativity. From an entrepreneurial 

| 79 


perspective, innovation is the creation of a new product or service, or a new method or 

combination. The marriage of innovation and entrepreneurship requires one to visualize the 

process. First is the vision, the idea, the concept which gradually materializes in our minds and 

our hearts; an idea that we simply know is great. It can be described as that “Eureka!” moment 

of true discovery. We create or develop these ideas and concepts in our minds, we refine and 

develop them, generally through discussion with others. Finally, we must translate those ideas 

and concepts into reality. If innovation is to have more than psychological value, it must become 

more than thought. It must become tangible. 

Yet if we stop here, then where is the value to humanity? Is our creation something we 

feel compelled to share, or will we be satisfied with the secret knowledge of our own creation? 

Is our creation of potential value to others? If so, then could we find both psychic and financial 

reward from its becoming? Entrepreneurship is the process of this translation. We create an 

enterprise which brings our concept to life. Now, we can enjoy the psychic reward of creation 

while we share our great discovery with the world. 

TYPES OF INNOVATION 

Creativity has many forms as we see in the literature. Paul Torrance (1979), an early 

writer in the field, described four elements of creativity. Fluency refers to the production of a 

great number of ideas or alternate solutions to a problem. Fluency implies understanding, not just 

remembering information that is learned. Flexibility refers to the production of ideas that show a 

variety of possibilities or realms of thought. It involves the ability to see things from different 

points of view; the ability to use many different approaches or strategies. Elaboration is the 

process of enhancing ideas by providing more detail. Additional detail and clarity improves 

| 80 


interest in, and understanding of, the concept. Last is originality which involves the production 

of ideas that are unique or unusual. It involves synthesis or putting information about a concept 

together in a new way (Torrance, 1979). While these elements of creativity connote pure ideas, 

their translation into a tangible innovation usually results from either elaboration or originality. 

This means that the translation of an idea into reality typically involves the creation of a 

new product or service or the enhancement of an existing product or service. In the realm of 

business, we often see entrepreneurial firms innovate as evidenced by originality while in larger 

firms creation of a new use for an existing product or service, the combination of existing 

products or services in new ways or simply the enhancement of the ingredients, packaging, 

advertising or message, are the preferred methods of innovation. In fact, in an early study 

Edwards and Gordon (1984) reported that small businesses produced 2.4 times the innovations of 

their larger cousins and the pre-eminence of small firms in innovation is still evident in a 2005 

study conducted by Baumol (2005). 

As early as 1934, Joseph Schumpeter, often identified as the “father of entrepreneurship,” 

called innovation, “creative destructionism.” He elucidated upon this commentary by 

enumerating the aspects of innovation-generating creative destruction in an industry: new 

markets or new products; new equipment; new sources of labor or raw materials; new methods 

of organization or management; new methods of inventory, transportation, communication, 

advertising or marketing, etc. (Schumpeter, 1934). 

Schumpeter’s (1934) view is complementary to Torrance’s (1979) perspective of 

elaboration and originality. He went on to explain that these innovations could destroy old 

markets, old products, old services, old ways of doing business. Hence the creation of the 

|81 


innovation resulted in the destruction of its predecessor. 

APPLICATIONS OF INNOVATION 

In large measure we owe our national standard of living to the fruits of creativity. The 

innovations that have taken tangible form over the years constitute all of the products and 

services which we enjoy. Collectively, these innovations create and continue to evolve the 

economy of the nation, and of the world. A powerful perspective, but one which suggests an 

important question. How were all of these fabulous innovations translated into workable 

components of the economy? The applications of innovation hold special significance for us. 

There are several paths to innovation application. One which is frequently overlooked is 

gifting of the intellectual property. We frequently forget about the vast impact of freeware, open 

source software, the sharing of ideas, research, insights and breakthroughs. Conferences, 

academic publication, informal discussion groups, and a myriad of idea communication and 

distribution networks have evolved in the United States and the world. These innovation sharing 

networks continue to be a powerful factor in the evolution and application of technology, 

knowledge and innovation of all types and in virtually all fields; perhaps the most powerful. One 

could argue that the Internet itself is simply an outgrowth of the desire to share ideas and 

insights: the ultimate network. 

The virtually complete absence of financial incentives involved in these networks form 

no impediments to the application of innovation. Some people might even suggest that the 

absence of financial incentives enhances the innovation process. It is the sharing of ideas and the 

exchange of insights that drives innovation, so the more minds we involve in the process, the 

more powerful the results and the more rapidly the innovation emerges. If we have people who 

| 82 


are focused on making money from an innovation, they tend to be more reticent about sharing 

ideas and tend to take steps to protect the intellectual property. 

The pervasiveness of this view among academic and philanthropic groups and networks 

of social entrepreneurs makes it clear that psychic rewards are real and are real drivers of the 

creation of innovation. Being the parent, even just one of the parents, of an innovation brings a 

vast sense of satisfaction. Humans have an innate need to create and that drive is the real source 

of the individual payoff for the work and effort involved in innovation. The power of these 

psychic rewards is incalculable. 

However, the actual application of innovation in society is not purely the result of 

altruism. It takes money to perfect an innovation and distribute it to consumers of that 

innovation. This is commercialization: casting the innovation in tangible form which is ready for 

consumption and delivering it for consumption to the people of the community, region, nation 

and world. 

Clearly the profit motive is a powerful one, but not the only one. Consider electricity. 

Virtually everyone in the United States can afford electricity. That is largely the result of low 

cost production, but it required the efforts of a great number of local rural cooperatives to 

develop the last miles of power lines for delivery to less profitable venues. 

The point is that society cannot enjoy an innovation without commercialization of that 

innovation. It is equally clear that the commercialization process has the potential to create 

profit, and sometimes, vast wealth. The pursuit of such wealth is a potent driver of creativity and 

innovation, although that pursuit may not be as powerful as the psychic driver. 

Consider the interest in patents. The idea that one can invent something and license it for 

| 83 


commercialization to a large firm is so pervasive in our society that it is almost a cliché. In 

reality, this seldom happens. Only a tiny number of inventions, less than 3%, are actually 

licensed to large firms on a royalty basis and make money for their inventors (Stim, 2006). 

There are really very few inventors who are making a living in research and development. Most 

of the people we think of as inventors, were, and are, actually entrepreneurs. 

We know that large firms do actively engage in research and development, investing 

money in the process, with the idea of commercializing innovations which result for the benefit 

of the company. Yet, there is really very little real innovation which flows from this process in 

most industries. There are exceptions, of course, like pharmaceuticals, but by and large, original 

innovations flow disproportionately from entrepreneurial enterprises (Edwards & Gordon, 1996; 

Baumol, 2005). 

American folklore makes it clear that the best way for innovation to reach the people is 

for the innovator to create an enterprise to commercialize it. That is the American Dream; to 

become an entrepreneur. The pioneers that settled our nation were not just fleeing religious 

persecution, they were seeking the opportunity for economic self sufficiency. It is no accident 

that our early history demonstrated the power of that drive as our people covered the world with 

Yankee trading ships. We were founded as, and we are today, a nation of entrepreneurs. 

ENTREPRENEURSHIP: THE ULTIMATE EXPRESSION OF INNOVATION 

It is generally accepted that entrepreneurs “serve as agents of change; provide creative, 

innovative ideas for business enterprises; and help businesses grow and become profitable” 

(Kuratko & Hodgetts, 1998). In an early work in 1984, Carland, Hoy, Boulton and Carland 

proposed to define an entrepreneur as, “an individual who establishes and manages a business for 

| 84 


the principal purpose of profit and growth... characterized principally by innovative behavior and 

[who] employs strategic management practices”. In contrast, they defined a small business 

owner as, “an individual who establishes and manages a business for the principal purpose of 

furthering personal goals” (Carland et al., 1984). That definition enjoyed initial widespread 

acceptance, and has recently emerged again as potentially useful. In 2003, a group of Australian 

researchers noted that the Carland et al. (1984) definition embodied five basic dimensions: 

establishment status (venture founder or non-founder); profit importance; growth orientation; 

innovative behavior; and the use of strategic management practices (Johnson, Newby & Watson, 

2003). Their research demonstrated that the most important and powerful differentiating factor 

was innovation. 

In a later paper, Carland, Carland and Stewart (1996) defined entrepreneurs much more 

simply as those who have “...the ability to see what is not there”. They actually believe that such 

vision must be coupled with the drive to make the vision real. In essence, this perspective of the 

entrepreneur suggests that he or she has the intuition and insight to recognize an opportunity to 

establish products, services, and industries where none now exist; and, also has the ability to 

create an opportunity to establish products, services and industries. 

This ability to see into the future, to dream of possibilities, and to dare to act is that series 

of attributes that drive entrepreneurs to turn dreams into reality. This, indeed, is innovation in 

action: a tangible, profitable, creation which drives the wealth and welfare of people and nations. 

At every phase, innovation is the driving force: the ultimate expression. 

| 85 


FINANCIAL ASPECTS OF ENTREPRENEURSHIP 

Most economists seem convinced that innovators do not reap financial rewards for their 

efforts. In a sample of 1,091 patented inventions, Astrebro (2003) reported that the average 

internal rate of return on a portfolio investment of those inventions would yield only 11.4%. 

Even worse than the mean data, Astrebro (2003) reported in this highly respected study that the 

median return on such a portfolio was actually negative. Even that statement fails to capture the 

seriousness of the study. Of the 1,091 patents, only 75 patents (7%) actually reached the market; 

which means that 93% never saw the light of day. Further, sixty percent (60%) of the patents 

which did reach the market, lost money. This leaves only 30 patents (2.7%) which actually made 

money. Of those, six (6) inventions created real wealth for their creators, with the top return at 

the 1,400% level. The net result of the study suggested that one half of one percent of inventions 

really are successful (Astebro, 2003). 

Astrebro’s (2003) findings were consistent with virtually all of the other studies, and 

there have been a number of these studies. Nordhaus (2004) estimated that innovators capture 

only about 2.2% of the returns from an invention, and Baumol (2002) had similar findings in his 

study. 

If we accept the findings of these respected researchers, then we are left with a burning 

question in our minds: So, why innovate? If the financial rewards for innovation are as rare as a 

lightning strike, then is all of the creative effort driven by psychic rewards? Is the only thing that 

propels innovation, the need to create? 

We cannot accept that proposition because it would imply that most commercializations 

occur through the process of businesses sifting through the various networks of academics, 

| 86 


idealists, social entrepreneurs, and inventors to find marketable innovations among the gifted 

intellectual property. That is not what happens. There might be an occasional innovation that an 

enterprise discovers from the mountain of developments that are being gifted to society each day, 

but most innovations are brought to market for one of two reasons. Either the sponsoring 

enterprise is virtually certain of financial success, or the sponsoring enterprise is an 

entrepreneurial venture engaged in the great social experiment of proving the viability of a new 

innovation. 

INNOVATION IN ENTREPRENEURIAL ENTERPRISES 

We all know that not every entrepreneurial enterprise is innovative. You can probably 

name a dozen ventures near your home which seem to do exactly the same things as everyone 

else. However, it is clear that those entrepreneurial enterprises which practice innovation grow 

more strongly and become more vibrant (SBA, 1995). 

There are numerous studies which demonstrate that entrepreneurial ventures 

disproportionately produce new products and services. Many of these studies use patent activity 

as a proxy for innovation in general because it is easier to measure. One impressive study 

sponsored by the Office of Advocacy of the U.S. Small Business Administration examined 

194,000 patents filed by more than 1,000 firms between 1996 and 2000 (SBA, 2007). In 

comparison to patents produced by large firms, the study concluded that a patent filed by a small 

business was more than twice as likely to be among the top one percent of most frequently cited 

patents; that small firms represent one third of the most prolific patenting companies; and, that 

small firm research is substantially more high tech or cutting edge and twice as closely linked to 

scientific research (SBA, 1999). This study clearly demonstrates the value of small firms in 

| 87 


producing economic wealth for the United States. 

We have already talked about the tendency for true breakthrough innovations to arise in 

entrepreneurial enterprises. From airplanes to hydraulic brakes to pacemakers to safety razors to 

zippers (SBA, 1995), we owe much of our standard of living not to the safe, secure, risk-free 

research and development efforts of major companies; we owe it to entrepreneurs with limited 

resources and big ideas! There was a great entrepreneurial movie produced by George Lucas in 

1988 called Tucker: The Man and His Dream (Schulman & Seidler, 1988). Francis Ford 

Coppola had long admired Tucker and when he asked Lucas to produce the film under his 

direction in 1988, the team won three Academy Award nominations and produced a film for the 

ages. In the closing scenes of the film, set in 1948, Tucker, the developer of the most innovative 

car in history, had actually built 51 automobiles, but was facing bankruptcy and prison time for 

securities fraud. The Tucker Car Company died along with his dream for a breakthrough in the 

automobile industry, but Tucker tosses off the loss with perfect aplomb, “Those are just 

machinery! It’s the idea that counts, Abe! And, the dream!” (Schulmand & Seidler, 1988). An 

earlier, and much less frequently cited quotation occurs in the film when the manager of Tucker 

Cars is on the witness stand testifying against Tucker. This manager had been installed by 

stockholders to hold back the tempestuous Tucker, and to protect their investment. An 

experienced manager, he explained to the jury, “A well managed company doesn’t innovate! 

Unless, of course, it is forced to by its competition!” (Schulman & Seidler, 1988). 

Tucker did not live to see his innovations become commonplace in modern automobiles, 

but one wonders if he really cared. After all, he built the car of his dreams: 51 of the beauties, 44 

of which are still operational today! If you believe in psychic rewards even in the slightest, then 

| 88 


you know he has to still be smiling somewhere! 

Tucker made and lost several fortunes in his life, and when it ended he was trying to raise 

money to start yet another company in Brazil. The interesting thing about the entrepreneurial 

psyche is that it doesn’t seem to matter whether money is made or lost; the drive to innovate 

survives. Steve Jobs sold all but one share of his stock in Apple on the day he was fired for a 

reputed $130 million. The next day he started NeXt, the company he sold back to Apple 17 

years later when he became CEO again (Jobs, 2007). Such legends ignore the millions of serial 

entrepreneurs throughout history who lost everything in a venture, and pulled themselves up to 

launch yet another dream. Ted Turner may have thrown himself into philanthropic work, yet he 

has three business ventures ongoing, including a new one he started in 2007 (Turner, 2007). 

Money is a tool in the hands of an entrepreneur and the best way to use that tool seems to be in 

driving more innovation. 

The stories of these macroentrepreneurs (Carland & Carland, 1997) may be the stuff of 

legend, but ask an entrepreneur in your neighborhood what he or she is doing differently from 

the competition and you are likely to initiate a discussion of innovations tried, abandoned, and 

adopted in a continuous effort to make the venture more viable and more successful. 

Entrepreneurs do not just go to work every day and wait for the weekend. Entrepreneurs are 

immersed in their ventures and that immersion drives their interest in innovation and their need 

to continuously create. Listen to managers talk and compare that to the conversation of 

entrepreneurs to see the disparity in their perspectives. Managers talk about their last vacations, 

last weekend, next weekend, their next vacations; they talk about their lives outside the business. 

Entrepreneurs talk about their lives inside their businesses and their conversation is peppered 

| 89 


with stories of the business and their efforts in it; frequently punctuated with descriptions of 

innovations. 

New methods of competition and the validity of new products and services are played out 

on the entrepreneurial stage and when the give and take in the market place makes it clear that a 

new wave is coming, entire paradigms shift. Industries die and new industries are born. It is a 

complex interplay between small businesses and large. The small tend to lead the way and prove 

the concepts; the large tend to devour the small then apply economies of scale to drive down 

costs and expand the application of the innovation to the masses. But, we must never lose sight 

of the fact that the originating innovation is almost always entrepreneurially based. 

THE ENTREPRENEURIAL MINDSET 

The process is clear: entrepreneurs initiate business ventures. What is not clear is why 

they do so. The debate continues to rage about entrepreneurial behavior and this singular act of 

individual volition which is so vital to a nation’s economic health and well being. The drives and 

personalities continue to be debated. In 1988, Bill Gartner asked, “Can one know the dancer 

from the dance?” (Gartner, 1988). Is it even important to try? A rejoinder to Gartner in 1988 

was proffered by Carland, Hoy and Carland (1988) who thought that one could not understand 

the dance without understanding the dancer. Surprisingly, this debate in the entrepreneurship 

literature continues to this very day, and researchers still cannot reach a consensus about the 

entrepreneurial mindset, or even the necessity to understand that mindset (Johnson et al., 2003). 

According to Carland et al.(1988), the dance takes on the personality of the dancer. It is 

the dancer who interprets the dance and each artist makes the process his or her own. They 

suggest that if we seek to understand the entrepreneurial process, we must have insight into the 

|90 


entrepreneurial psyche. This is especially true if we wish to design educational and training 

programs which can actually help prospective and practicing entrepreneurs. 

We have talked a bit about psychic rewards and the continuous emphasis on innovation, 

but does that mean that the potential for financial return is not a major factor? Baumol (2005) 

reports that there is systematic evidence dating back to the 1970s that self employed people make 

significantly less money than employees with similar qualifications. However, virtually all of 

the studies that deal with issues involving entrepreneurship and entrepreneurial ventures are 

cross-sectional in nature. That is, they are not longitudinal studies and may not be reflective of 

the underlying realities. 

For example, consider how real wealth generally comes calling in a business venture. 

The folklore may suggest that it revolves around “going public.” In reality, that is the path 

chosen by only a few ventures. By far the majority of the entrepreneurs who become wealthy do 

so by selling the enterprise. These sales are private sales, consequently, real information about 

the financial ramifications is not captured in economic databases and is absent from cross- 

sectional studies. 

We are left with the question, how often does it happen? How many entrepreneurs really 

do make a great deal of money? How many actually outperform their employee brethren? We 

don’t have an answer for that, but we do know that it does not matter. What matters is whether 

entrepreneurs have a perception of the potential for profit. Behavior is driven by perception, 

after all. So, if there is widespread belief that real wealth opportunity exists in entrepreneurship, 

that perception could well influence behavior. 

Anecdotally, we believe that the perception of the potential for financial returns is 

| 91 


widespread among entrepreneurs. We have consulted with hundreds of entrepreneurs over the 

last 30 years. It is certainly true that there are many people who have settled into a family- 

owned business and who appreciate the ability to make a living doing things they enjoy while 

making their own decisions about their lives. However, there are also many people who truly 

believe that real wealth is just around the corner. We believe that the potential for profit is a 

major driver of behavior. Even the entrepreneurs who talk about pending wealth, however, 

always mention the life style. In no other profession, they say, do you actually determine your 

own fate and define your own destiny. In no other profession do you get to prove the validity of 

your own ideas, and have the potential for great wealth. These are powerful motivators! 

ENVIRONMENT FOR CREATIVITY 

Typically, innovation does not occur on demand and yet that is what we often hear in the 

corridors of the large corporations. “We need a new product, a new idea, a new market!” 

“Quick, let’s brainstorm!” While some of us have many ideas, others of us have fewer. Idea 

people usually are not as qualified to evaluate their ideas for commercialization. It is almost as if 

we have dreamers and doers and we need a marriage between the two to turn those dreams into 

reality. That is one of the reasons for the power of an entrepreneurial team. But, again, 

creativity does not happen at the snap of a finger. We need to have the right environment, the 

right culture, the right philosophy and the right people. 

Most of the stories of truly innovative ventures have all of the best of these “rights.” 

Take IDEO (Kelley & Littman, 2001), Mars (Brenner, 1999), Google ((Vise & Malseed, 2005), 

and Southwest Airlines (Freiberg & Freiberg, 1996), as examples. They are quite successful 

companies who began much as you, some with more money and some with less, with a dream of 

| 92 


providing the best products or services that they could provide while having fun and being 

profitable and helping others. 

Each of these ventures created an open environment: one in which questions were 

welcome, discussion was expected, ideas were respected and possibilities were challenged. The 

structure allowed for openness and communication with the founders. There were no ivory 

towers, but constant engagement and lots of fun. Open areas, not enclosed rooms, gave the 

opportunity for the cross-fertilization of ideas, much as that process originally occurred in 

Edison’s Invention Factory (Beals, 1999). 

Edison provides a wonderful role model for the marriage of innovation and 

entrepreneurship. A great practical joker, he encouraged fun, and experimentation, and had a 

healthy respect for those who had tried and failed. Many of the founders of the most innovative 

companies embraced failure as it not only showed initiative, but also resulted in learning on the 

part of the individuals who had attempted the impossible but discovered something else. Edison 

pursued invention for the purpose of creating commercializable products. His failure to find a 

market for his first invention, an electric vote counting machine, led him to vow never to waste 

time inventing things that people would not want to buy (Beals, 1999). We suspect that he was 

still prey to the psychic rewards of innovation, but recognized the need to make money to keep 

his stream of innovations flowing. His remarkable career was more about entrepreneurship than 

invention as he created a network of companies to exploit the products that flowed from his 

“invention factory.” Among these was the Edison General Electric Company, which became 

General Electric. 

One of the adages which seems to be responsible for the immense success of Stanford 

| 93 


University graduates, Brin and Page of Google fame, has become a favorite of ours. The 

command is to “...create a healthy disregard for the impossible”(Vise & Malseed, 2005). With 

such direction, how could one not innovate! 

IMPLICATIONS 

This paper is our attempt to light a candle against the darkness for practitioners and 

academics. Innovation is necessary for the true success of a business and yet daily we erect 

barriers to it existence; we suggest that there is a right way to do things; we direct others to come 

up with new ideas that are foreign to us and which we know that we are not going to adopt; we 

cry out for ways to combat the competition while continuing to follow the status quo. To fully 

light up the darkness, we must break down those barriers and we must embrace innovation and 

begin the process of teaching its elements to our students and our practitioners. We must help 

entrepreneurs to understand that “success can sow the seeds of its own destruction” (Grove, 

1999). Doing things the way they have always been done breeds complacency and complacency 

breeds the ultimate demise of the company for lack of attention. We must believe in innovation, 

we must work at it and we must teach it. 

CONCLUSION 

Oliver Wendell Holmes (Holmes, 2007) is credited with the following observation: “A 

mind once stretched by a new idea never regains its original dimensions” And yet we find that 

years of disuse has led to stagnation in the creative psyche of so many people. In business, 

creativity was frowned upon as a non-serious pursuit for many years, until the realization that 

new products, services and processes came from creative minds. But the inverse of Holmes’ 

insight was found to be prevalent; i.e., that minds not used in creative pursuits become atrophied 

| 94 


and inactive. Then, when asked to “come up with a great new idea,” there is frustration and 

impotence. 

We need to exercise our minds and do it daily in pursuit of new and wonderful thoughts. 

A few enterprises are adapting strategies to support the development of these new mental 

pathways. These include retreats in which employees engage in creative activities as well as 

using flex-time for the pursuit of original endeavors. 

Most exercises and activities can be fun. Brain teasers, incomplete drawings, creative 

problem solving exercises, problem identification and brainstorming can be quite useful to 

stretch the mind. The key at the initial stages is to be playful, not judgmental. Too often in 

business, the urgency expressed to “come quickly to commercialization” prevents really good 

ideas from being explored. Judgment expressed too early can result in satisficing rather then 

excelling. Experimentation is to be applauded and yet it is seen as expensive in most large 

companies and failure can lead to career limiting results. 

The IDEO philosophy (Kelley & Littman, 2001) is that individuals in both large and 

small enterprises can be innovative and creative. You need to create a fun environment, a playful 

attitude, the encouragement of wild ideas, the recognition of the value of collaboration of diverse 

minds on a task and the understanding of the role of failure. 

What a better world it would be if we could encourage creative thinking, stretching minds 

to embrace truly great ideas for the betterment of mankind! Innovation carries its own rewards, 

but financial success is a great companion. Entrepreneurship is the greatest vehicle we know to 

allow us to simultaneously envision, dream, analyze, create and profit. It is a life journey like 

none other. Innovation is its heart and soul, and in no other enterprise can you live your life as 

| 95 


your intuition dictates and enjoy the success that your mind creates. We encourage you to: 

Dare to Dream! 

| 96 


REFERENCES 

Amabile, T.M., R. Conti, H. Coon, J. Lazenby & M. Herron. (1996). Assessing the work 

environment for creativity, Academy of Management Journal. 39(5), October, 1154-1184. 

Astebro, T. (2003). The return to independent invention: Evidence of unrealistic optimism, risk 

seeking of skewness loving, The Economic Journal, January, 226-238. 

Baumol, W. (2002). The Free-Market Innovation Machine: Analyzing the Growth Miracle of 

Capitalism, Princeton, NJ: Princeton University Press. 

Baumol, W. (2005). Small Firms: Why Market-Driven Innovation Can’t Get Along Without 

Them. The Small Business Economy. Washington, DC: The U.S. Small Business 

Administration, Office of Advocacy, 183-206. 

Beals, G. (1999). Biography Of Thomas Alva Edison. http://www.thomasedison.com/ biog.htm; 

retrieved January 18, 2007. 

Brenner, J.G. (1999). The Emperors of Chocolate: Inside the Secret World of Hershey and Mars. 

New York: Random House. 

Carland, J. A. & J.W. Carland. (1997). Entrepreneurship: An American Dream. Journal of 

Business and Entrepreneurship, 9(1), March, 33-45. 

Carland, J.A., J.W. Carland & W.H. Stewart. (1996). Seeing what’s not there: The enigma of 

entrepreneurship. Journal of Small Business Strategy, 7(1), Spring, 1-20. 

Carland, J.W., F. Hoy, W.R. Boulton & J.C. Carland. (1984). Differentiating entrepreneurs from 

small business owners: A conceptualization. Academy of Management Review, 9(3), 354- 

359. 

Carland, J.W., Hoy, F. & Carland, J.A. (1988). Who is an entrepreneur? Is a question worth 

asking, American Journal of Small Business, 12(4), 33-39. 

Edwards, K.L. & Gordon, T.J. (1984). Characterization of Innovations Introduced on the U.S. 

Market in 1982 Report No. PB84-212067CVB, prepared by the Futures Group for the 

U.S. Small Business Administration, Office of Advocacy, Springfield, VA: National 

Technical Information Service. 

Freiberg, K. & J. Freiberg. (1996). Nuts!: Southwest Airlines’ Crazy Recipe for Business and 

Personal Success, Austin, TX: Bard Press, Inc. 

Gartner, W. (1988). Who is an entrepreneur? Is the wrong question. American Journal of Small 

Business, 12(4), 11-32. 

| 97 


Grove, A.S. (1999). Only the Paranoid Survive: How to Exploit the Crisis Points That 

Challenge Every Company. New York: DoubleDay, Inc. 

Http://www.quotatio.com/h/holmes-oliver-wendell. Holmes, retrieved on July 14, 2007. 

Http://www.sba.gov/advo/research/rs225tot.pdf Small serial innovators, retrieved on July 15, 

2007. 

Http://en.wikipedia.org/wiki/Soul Retrieved on July 17, 2007. 

Http://en.wikipedia.org/wiki/Steve_Jobs, retrieved on July 16, 2007. 

Johnson, D., R. Newby & J. Watson. (2003). Describing the entrepreneurs: How appropriate is 

the founder/non-founder dichotomy? Paper presented at the Small Enterprise Association 

of Australia and New Zealand 16 th annual Conference Ballarat, 28 Sept.-1 Oct. 

Kelley, T. & J. Littman. (2001). The Art of Innovation: Lessons in Creativity from IDEO, 

America’s Leading Design Firm. New York: Doubleday, Inc. 

Kuratko, D.F. & R.M. Hodgetts. (1998). Entrepreneurship: A Contemporary Approach, New 

York: Harcourt Brace College Publishers. 

Nordhaus, W.D. (2004). Schumpeterian profits in the American economy: Theory and 

measurement, Working paper 10433, Cambridge, MA: National Bureau of Economic 

Research. 

Schulman, A. & D. Seidler. (1988). Tucker: The man and his dream. San Francisco, CA: 

Lucasfilm, Ltd. 

Schumpeter, J. (1934). The Theory of Economic Development, (Translated by R. Opie), 

Cambridge, MA: Harvard University Press. 

Stim, R. (2006). Patent, Copyright & Trademark: An Intellectual Property Desk Reference. 

Berkeley, CA: Nolo. 

The State of Small Business: A Report to the President, 1994. (1995). Washington, DC: The U.S. 

Small Business Administration, Office of Advocacy, 114. 

The State of Small Business: A Report to the President, 1998. (1999). Washington, DC: The U.S. 

Small Business Administration, Office of Advocacy. 

| 98 


Torrance, E.P. (1979). The Search for Satori and Creativity, Buffalo, NY: Creative Education 

Foundation. 

Vise, D.A. & M. Malseed. (2005). The Google Story. New York: Bantam. Dell Publishing Co. 

www.tedturner.com. Retrieved on July 15, 2007 

| 99 


Potential Effectiveness of Salesperson Mirroring and Empathy Training in Selling to Small 

Business: An Examination 

Robin T. Peterson, Professor 

Department of Marketing 

College of Business 

New Mexico State University 

Las Cruces, NM 88003 

Email: Ropeters@nmsu.edu 

Bing Xu, Ph.D. Candidate 






Yam Limbu, Ph.D. Candidate 






|100 


Abstract 

| 101 

The study reported here assessed the potential effectiveness of mirroring and empathy training 

for sales representatives who serve small business firms. The discussion provides a review of the 

relevant literature and a study, utilizing students as sales representatives, which was undertaken 

to assess the potential of training in empathy and mirroring. Generally, the research upholds the 

premise that these forms of training and instruction may be useful to sales managers and others 

who train salespersons. 

Introduction 

While marketing by small business has been extensively studied, marketing to small firms has 

essentially been neglected by academia (Ellegaard, 2006).This paper makes an attempt to help 

fill this void, by evaluating the usefulness of training in mirroring and empathy for sales 

representatives who serve small business clients 

It is helpful to examine selling to small business because this segment represents an attractive 

target customer set for many firms, both large and small. Affluent economies, such as that in the 

United States, are highly dependent upon small business buyers for maintaining the flow of 

goods and services (Carree, Van Stel, Thurik, & Wennekers, 2007). Of course, some industries, 

such as tourism, are more dependent on small business clients than are others (Smith, 2006). 

Cotton & Cachon (2007) has produced evidence that small retailers can survive and grow even 

in the face of large mega-retailers such as Wal-Mart. Thus, these retailers represent a reliable 

long term target market. A U.S. Census Bureau study has found that businesses run by 

individuals and families and on the internet has spawned a rising trend in the numbers and 


evenues of small businesses (Family, 2006). But turning these companies into customers often 

requires the development of trust and satisfaction and the provision of commitment and service 

quality, on the part of prospective vendor sales forces (Rauyruen & Miller, 2007). 

In order to successfully penetrate the small business market, suppliers can benefit through 

means of enhancing the success of their personal selling programs. But there are many ways of 

doing this and what aspects of personal selling might be most helpful? This paper presents one 

approach—training in mirroring and empathy. 

In the study described in this paper the selling performance of personal selling students who 

| 102 

were the recipients of training in mirroring alone, empathy alone, and a combination of mirroring 

and empathy, as compared to the performance of those who were not so exposed, was evaluated. 

Should the accomplishments of the trained groups significantly exceed those of the untrained, 

support for the inclusion of mirroring and empathy in company sales training programs would be 

in evidence. 

Literature Review 

One means of successfully communicating with target customers is through Anonverbal 

communication@or Abody language” (Mayer & Greenberg, 2006).@Manning & Reece (1992). 

Have depicted this as Amessages without words@or Asilent messages.@Mirroring is a type of 

body language. It consists of imitating the body language, speech patterns, and other behaviors 

of prospects. This form of communication makes up a set of skills which can be taught and 

learned (Schwebel & Schwebel, 2002) so its advantages can be attained by individuals who lack 

inherent natural ability. 


| 103 

Brownell (1999) has indicated that mirroring is conducting ourselves or behaving in a manner 

that offers a reflection back to the observer of themselvesBit can include any or all of the 

following: 

Similar eye expression, e.g.,eye contact, eye fixation, eye 

movement 

Similar energy, e.g., use of gestures, speed of motion or lack of 

motion 

Similar clothing, e.g., color, fashion, formal or informal 

Similar facial expressions, e.g., smiling, frowning, mouth relaxed 

Similar head position, e.g., erect, forward, backward, tilted 

Similar body position, e.g., relaxed, military 

Similar stance/posture, e.g., open, closed 

Similar voice expression, e.g., fast speech, slow speech, low tone, 

high tone 

Similar vocabulary, e.g., sophisticated, esoteric, familiar 

Essentially, mirroring is grounded upon the fact that people tend to feel comfortable with 

those who communicate nonverbally the way they do (Weinberg & Toder, 2004). That is, they are 

drawn to people with whom their body language is like their own (Mowatt, 2006). However, 

some experts caution that there is a thin line between mirroring and mocking and A...if you go out 

and try blinking when they blink, nodding when they nod, and talking with their accent, people 

will think you =re making fun of them@(Carter, 2001). 

There are indications of mirroring applications to business activities other than sales. In this 


egard, Gadberry proposes that financial analysts should clone the posture of the person being 

addressed when attempting to create a favorable impression in a business meeting or 

| 104 

conversation (Gadberry, 1993). Another source suggests that human resource departments should 

encourage the use of mirroring by employees of the company, in order to reduce staff conflicts 

(Murphy, 1987). Yet another indicates that leaders should practice mirroring when interacting 

with subordinates, in order to engender motivation (de Vries & Kets, 1989). 

In summary, various business related writings frequently mention the promise of mirroring. 

But, none of these evaluate the usefulness of this method in a sales context through an analytic 

and quantitative approach By the objective of the present study. 

This research examined the potential value of training salespersons in the practice 

of empathy. Empathy deals with emotions such as joy, pain, pride, guilt, love, beauty, sadness, 

and anxiety (Wong & Sohal, 2002). Essentially, empathy involves feeling the same emotion that 

is expressed by the prospect (Rand, 2006). Empathetic sales representatives can mentally place 

themselves in the other person =s situation. They perceive this situation in the same manner as 

does the prospect (Martz, 2001). 

Generally, empathy is a learned quality, although for some it may be an inherent trait 

(Bagozzi, 2006). Some sales representatives practice it without knowing it. But the real value 

found in empathy is to use it knowingly (Holm, 1997). 

When employing empathy, the salesperson role plays the prospect, adapting to the 

perspective or attitude of the other (Angera & Long, 2005). He or she not only feels empathetic 

but also is able to project this quality in a way so that the prospect is aware that the sales 

representative understands the personal situation and problems that exist (Rasmusson, 2000). 


Empathy is cited as incorporating four components (Hakansson & Montgomery, 2003): 

1. The empathizer comprehends the target =s emotions and 

situation. 

2. The target feels one or more emotions. 

3. The empathizer senses a similarity between what the target is feeling and something the 

1. empathizer has previously felt. 

4. The empathizer cares about the well-being of the target. 

Smith (2006) proposes that two types of empathy existBcognitive (mental perspective 

taking and emotional (vicarious sharing of emotion). The first, cognitive empathy, allows 

individuals to understand and predict the conduct of others in terms of attributed mental states. 

This can facilitate conversation and social expertise. Alternatively, emotional empathy moves 

individuals to act altruistically toward others. Bit promotes social bonding. In 

essence,Atrue@empathy integrates both the cognitive and emotional components (Kerem, 

Fishman, & Josselson, 2001). However, empathy should not be mistaken for sympathy. This is 

because the former involves both cognitive and affective responses, while the latter primarily 

entails affective responding (Martz, 2001). 

Hypotheses 

Some indicators suggest that mirroring could be a helpful contributor to productivity in the 

ranks of sales representatives. One inquiry has indicated that behavioral mirroring can affect the 

perceptions individuals hold regarding others =character and behavior (Manusov, 1993). A 

| 105 

rationale for this is that cooperative thinking best occurs in the context of spatial relations, which 


| 106 

is characterized by an ability to opt for similarities (Barwick, 2004). Another study demonstrated 

that the perceived persuasiveness of an individual who employs mirroring in a group discussion is 

significantly greater than that of one who does not make use of this process (Van Swol, 2003). 

Some references report on the effect of mirroring in particular applications and 

circumstances(Ingram, et. al., 1992). Those waiters who mirror the behavior of their customers 

have been able to obtain larger tips than those who do not and customers tend to voice greater 

satisfaction in conversing with waiters who mirror their non-verbal behavior (Diksterhurt, Smith, 

Van Buren, & Wigholes, 2005). In turn, married couples have been found to be collaborating 

indirectly as a symbolic resource in the construction of self identity by mirroring (Golen, 2002). A 

British brand design company (Williams Murray Hamm) discovered that they can best convince 

clients to use package designs created by the company by mirroring the behavior and ideas of the 

clients (Dowdy, 2006). 

Both practical experience and research suggest that mirroring can be learned and taught. 

Organizations are alert for avenues that can add value to their training programs and one path for 

accomplishing this is to include topics that are especially relevant for the trainees (Dodgson, 

2003). There is evidence that well-conceived training programs can successfully teach individuals 

to achieve proficiency in mirroring (Murphy, 1987). Schwebel & Schwebel (2002) make a blanket 

statement that mirroring incorporates a combination of skills that can be taught and learned. 

Social workers who have undergone focused in-classroom education in mirroring have produced 

more effective communications with their clients than have others who did not receive this 

training (Preston-Shoot, Taylor, & Lishman, 1999). Some parents who have received training in 

this area have shown progress in enhancing their ability to overcome problem behaviors in their 


children (Van Zeiji, et. Al., 2006). One study indicates that therapists who obtain mirroring 

| 107 

instruction tend to become more proficient in their work (Pisani, Colangeli, Giordani, & Popolla, 

2006). Even actors who obtain this training have been found to improve their coherence with 

others with whom they interact (Dobel, Gumnior, Bolte, & Zwitserlood, 2007). 

Of course, the discussion above does not suggest that mirroring training should replace 

traditional coverage, such as prospecting, querying, and listening. Rather, it appears that mirroring 

instruction may improve the achievement of the trainees, beyond that which they might 

accomplish by using only more conventional training coverage. 

The literature review produces some support for the first hypothesis, which is: 

1. H1: Sales representatives who are trained in mirroring will be more effective in producing 

intentions to purchase among small business target customers than will those who do not receive 

this training. 

Various indications suggest that empathy is capable of contributing to personal selling 

productivity. Hence it may be a significant candidate for inclusion in training efforts. A recent 

review of the literature found that four positive emotions surfaced as necessary for high quality 

salesperson performance- attachment, customer relations Bpride, empathy, and emotional wisdom 

(Bagozzi, 2006). In addition, empathy has been identified as one of the characteristics of superior 

sales representatives (as gauged by customer satisfaction), along with assertiveness, ego strength, 

sense of urgency, ego drive, willingness to take risks, sociability, abstract reasoning, creativity, 

and skepticism (Rasmusson, 2000). At the retail stage, empathy has been proposed as the most 

crucial contributor to relationship quality at the company and employee levels (Wong & Sohal, 

2002). Further, empathy seems to present a positive moderating effect between customer-oriented 


attitude and customer-oriented behavior (Stock & Hoyer, 2005). 

| 108 

There is support for the position that empathy can be taught and that this training can improve 

productivity (Coulter & Coulter, 2003). It has been suggested that for professionals working with 

other people, a systematic training for the ability to show empathy should be a valuable and 

necessary part of their education (Holm, 1997). College students who have been trained in this 

area have been found to possess more empathy than those who are not and to advance their 

verbalization skills, understand situations more precisely, and to make more accurate insights on 

the thoughts of others, as a result (Brems, Fromme, & Johnson, 1992). Counselors with this 

training have been found to have advanced their listening abilities and counseling practices 

considerably (Nerdrum & Ronnestad, 2003). Psychotherapists have discovered that empathy 

training can improve their ability to communicate with their clients (Rand, 2006). 

Empathy training has assisted normal children in their efforts to teach physical education to 

other children who have physical difficulties (Lockhart, French, & Gench, 1998). Couples in 

marriage and romantic relationships who have received empathy training have demonstrated 

advances in the quality of their relationships (Angera & Long, 2005). 

The discussion above sets forth substantiation for the presumption of empathy training as an 

effective sales productivity enhancer. Accordingly, Hypothesis Two is: 

2. H2: Sales representatives who are trained in empathy will be more effective in producing 

intentions to purchase among small business target customers than will those who do not receive 

this training. 

Various indications suggest that, for sales representatives, a combination of mirroring 

practices and a mental state marked by empathy may be more productive than either of these 


| 109 

practices alone. That is, the two may be natural supplements that are able to bring about desirable 

synergistic outcomes. According to Batson, Lishner, Cook, & Sawyer (2005): 

What accounts for variation in empathy? Currently, one of the most popular explanations 

among personality and social psychologists is perceived similarity. We feel sympathy and 

compassion for others to the degree that we perceive them to be like us. 

Various other researchers have found possible indications of positive relationships between 

perceived similarity and empathy (Coulter & Coulter, 2003; Gill, Flaschner, & Scachar, 2006). 

The point is that when one engages in mirroring, he is she enters into a state of behavioral 

similarity. And, as similarity and empathy may be linked (Gill, Flaschner, & Shachar, 2006), there 

is a possible positive synergistic effect. As stated by Persson, Laaksolahti, & Lonnqvist (2001) 

AExpectations on visual appearance and behavior of others explains a great deal about empathy.@ 

When sales representatives are successful in mirroring, they may produce the impression on the 

part of the prospect that the two are both members of the same or similar groups, since their 

behavior is in concert. And empathy is a stronger predictor of communication effectiveness when 

the communicator and the recipient appear to be members of identical groups, thereby increasing 

the probability of attraction between the two parties (Sturmer, Snyder, & Omoto, 2005). 

It appears that attachment style (the set of attitudes and perspectives which one holds when 

relating to others) may provide at least a partial explanation for a joint effect of mirroring and 

empathy. Research indicates the existence of three attachment styles (secure, avoidant, and 

ambivalent). The secure style is related to comfort with closeness to another person Ba 

requirement for effective mirroring. In turn, a secure style is positively associated with empathic 

concern and ability to adopt the perspective of another (Joireman, Needham, & Cummings, 2002). 


Both a secure attachment and empathy connote a willingness to approach others, and both act to 

facilitate functioning in interpersonal relationships. In turn, a secure attachment provides 

substantial support and comfort to relationship partners (Fraley & Shaver, 1998). Logically, 

mirroring can be contributive to the acceptance of a secure style. 

Other signs of a connection between mirroring and empathy are attainable through a scrutiny 

of listening theory research (Batson, et. al., 05). From the customer=s perspective, 

listening may be the single most important skill that salespeople can hold (Moore, Eckrich & 

Carlson, 1986). In this regard, a study of sales representatives disclosed that one of the most 

| 110 

significant reasons that salespeople are unsuccessful is failure to listen well (Ingram, Schwepker, 

& Hutson, 1992). In turn, Fracaro (2006) proposes that empathy may be of value in enhancing 

the probability of success achieved by sales representatives through active listening. Through 

listening, congruence can be attained among the thought processes of sales representatives and 

prospects, and research shows that congruence is closely associated with empathy (West, 2006). 

Further, agreeableness, another possible impact of listening, is significantly correlated with 

empathy (Lin, Chiu, & Hsieh, 2001). 

When sales representatives mirror, they become attentive to verbal and non-verbal signals. 

In turn, the most effective listening combines empathy with specific techniques of active 

listening (Comer & Drollinger, 1999). While empathy and listening are two separate constructs, 

empathy is a salesperson characteristic which has the potential for raising listening skills 

(Aggarwal,Castleberry, Shepherd, & Ridnour, 2005). Sensing in listening includes non-verbal 

signals, such as body language, facial expressions and proxemics, and understanding refers to an 

individual =s capability of accurately ascribing meaning to incoming messages, both verbal and 


non-verbal (Nicols & Stevens, 1957). Further, an element of listening consists of responding 

By transmitting messages back to speakers, showing that their messages have been correctly 

received. This process can ensure to the customer that accurate listening has occurred and 

encourage continued communication . 

Comer & Drollinger (1999) refer to the process of combining empathy and listening, 

which they call Active-Empathetic Listening (AEL). This is defined as: 

...a process whereby listeners receive verbal and non-verbal messages, process them 

cognitively, respond to them verbally and non-verbally, and attempt to assess their underlying 

meaning intuitively by putting themselves in the customers=place throughout. While active 

listening is desirable in the sales setting, it can appear to be contrived or empty. Active listeners 

try quite hard to appear attentive to verbal and non-verbal cues, but may seem to be listening 

mechanically and fail to project a genuine level of concern for what is actually being said. We 

contend that for communication to be effective, genuine concern is requisite. 

The discussion above provides rationale for a third hypothesis. It is apparent that there may 

be rationale for a combination of mirroring and empathy training, serving as a supplement to 

traditional training. The hypothesis follows: 

| 111 

3. H3: Sales representatives who are trained in both mirroring and empathy will be more effective 

in producing intentions to purchase among small business target customers than will those who 

do not receive this training or who are trained in empathy but not mirroring or mirroring but not 

empathy. 

Research Methodology 

Controlled experimentation was the method utilized to assess the hypotheses. This method 


permits testing the impact of one or more variables (such as training) on other variables (such as 

| 112 

sales performance), in order to arrive at conclusions (Peterson, 1995).The productivity of students 

who were trained in mirroring and empathy was compared to the productivity of those who did 

not receive such training. In turn, statistical analyses of the results revealed whether the 

hypotheses stated earlier should be supported or rejected. 

The study involved students who were enrolled in the authors =personal selling classes 

over two academic years and two summer sessions. Each of twelve separate classes was broken 

down into four groups. In turn every one of the groups was assigned to one of four research 

groups (three of which were treatment and one was a control group). All four research groups 

consisted of the same number of students (120) selected randomly from the class rolls, for a 

total sample size of 480. 

The members of each research group were exposed to specific training or lack of training 

experiences, in addition to conventional lecture and discussion, case analysis, role play, and 

textbook reading assignments. These specific experiences took place two weeks before final 

examination week. This timing was in effect in order that the training of the students and the field 

experiments would have sufficient time for completion but would not interfere with final 

examination week. Their treatments were as follows: Group One members obtained training in 

mirroring. Those in Group Two received empathy training. The students in Group Three secured 

training in both mirroring and empathy. Finally, Group Four (control group) participants were not 

exposed to training in either mirroring or empathy. 

In this study, the sampling plan was structured so that the students in each class were 


| 113 

randomly assigned to the groups by the instructor. As a means of mitigating contamination of the 

results, those portions of the required textbook which covered mirroring or empathy were not 

assigned to the class and the instructor did not touch upon these topics in the regular classroom 

lectures. 

The individuals in Research Group One attended two sessions (made up of fifty minutes 

each) of training in mirroring. In turn, research suggests that training periods of this length can be 

effective in conveying insights and perspectives on nonverbal communication (Schwebel & 

Schwebel, 2002). Allied training insights are available in (Boardman, 1995 and Mowatt, 2006). 

During the first training session in mirroring, the students received a set of instructions on how 

to mirror and were requested to study it briefly. Next, the instructor lectured for twenty-five 

minutes, going over each of the sections in the instructions. After this, a student (not a participant 

in the study) who had been briefed by the instructor posed as a prospect in a role playing situation 

where the instructor explained each item in the instructions. In this case, the role playing process 

was of twenty minutes duration. In a follow-up training session the instructor and the role playing 

student demonstrated each of the items in the document, over a twenty-five minutes time span. 

For the next twenty minutes, the students practiced each of the suggestions, using another student 

as a prospect. This second training experience closed with a five minute review of the previously- 

covered material. The Group Two members attended two sessions (made up of fifty minutes 

each) of empathy training. Related training insights are available in ( Edwards, 2006 & Smith 

2006). 

During the first empathy training session, the students received a set of instructions on how 

to use empathy and were asked to study it briefly. Next the instructor lectured for twenty-five 


minutes, going over each of the items listed in the instructions. After this, a student (not a 

participant in the study) who had been briefed by the instructor acted in a role play exercise, 

where the instructor demonstrated each item in the document. This role playing procedure 

consumed twenty minutes. 

In a follow-up empathy training session, the students received a second set of instructions 

| 114 

on how to use empathy. These instructions explained exercises to be performed in the classroom. 

The exercises were devised to assist students in developing self awareness and in becoming 

aware of cognitive and affective variations among individuals. In turn, these two qualities are 

normally embodied in programs formulated to train personnel for counseling roles (Smith, 2006) 

and have been used successfully by the authors in empathy training programs for professional 

sales representatives and personal selling students. Each of the exercises was performed by the 

students in a ten minute time span. Finally, the training session concluded with a ten-minute 

review of the material previously included in the two Empathy training sessions. 

The students in Group Three were subjected to both the mirroring and the empathy training 

experiences, as described above. The goal was to discover the joint outcome of the two training 

themes. Finally, those who were assigned to Group Four made up the control group. These 

individuals were not required to participate in either mirroring or empathy training. 

An attempt was made to standardize the nature of the training which each of the groups 

experienced. That is, insofar as was possible, each group obtained training that was delivered in 

the same manner and with the same degree of positive support on the part of the instructor. In 

short, an attempt was made to eliminate or at least moderate bias brought about by the 

predispositions of the trainer. 


During the second to the last week of the semester (after the students had undertaken the 

| 115 

training involved in the study) each student made a sales call on an assigned small business Bone 

that was not assigned to another student (to avoid research contamination that might result from 

sales calls from two students). The subjects were selected randomly from the yellow pages of the 

local and two sister cities =telephone books and assigned to groups in a random fashionBa 

systematic sample. The authors contacted each business on the list and requested that the manager 

serve as a prospect for a student sales presentation. The goal of each student was to make a 

person-to-person sales call with the purpose of convincing the manager to attend a free Aeffective 

selling techniques @seminar conducted by one of the author/professors on campus. The students 

were instructed to employ the materials that they had learned in regularly-scheduled classes, in 

the training sessions prescribed by the research, and in the textbook in their persuasion efforts. 

Further, they were required to avoid collaborating with each other prior to the sales call, as a 

means of evading contamination of the study results from this source. 

The composition of the sample was 209 small retailers, 172 small service firms, 63 small 

manufacturers, 31 small wholesalers, and 5 Aother@small firms. The members of each of the four 

research groups contacted an equal proportion of the five industry groups, in order to mitigate 

contamination arising from the mix of industries. 

The goal of the research was to collate the effectiveness of the four groups in generating 

sought-after results. Three dependent variables were used to measure this goal. One was the 

number of successful sales (verbal intentions to attend the seminar as expressed by the retailers). 

An alternative dependent variable Bactual attendance at the retailer seminarBcould have been 


used. However, the researchers bypassed this option, as factors other than the persuasiveness of 

the student (such as the managers =personal time schedules, time conflicts. contingencies 

| 116 

emerging in their business operations, unexpected travel, and prior obligations) could affect their 

attendance at the seminar. The level of student training was deemed sufficient by the researcher to 

result in strong application of mirroring and empathy efforts in only one presentation. Other 

researchers have used only one sales call to measure empathy and related skills (Comer & 

Drollinger, 1999). A second dependent variable was a set of self reports prepared by the students, 

as regards the perceived effectiveness of the education/training they received throughout the 

semester (this includes mirroring, empathy, and regularly-scheduled instruction). The third 

dependent variable was self-reporting by the students on the value of the mirroring and empathy 

training they received. 

Analysis of Results 

Table One sets forth data on the number of small firms specifying an intention to attend the 

seminar. Following each sales presentation the student/sales representative asked the 

manager/prospect to respond to a one question questionnaire while the student was absent from 

the room. The questionnaire read: APlease indicate on this form with an X, your intentions 

to attend the seminar.@In turn, the alternative responses were: ADefinitely will 

attend,@AProbably will attend, @ADon=t know,@AProbably will not attend,@and >Definitely 

will not attend.@A Chi Square test of the frequencies indicates significant differences 

between the group frequencies at a .05 level. The calculated value of Chi Square was 26.297, 

exceeding the critical value (21.026) with twelve degrees of freedom. 


Those groups with statistically significant percentages, according to t tests at the .05 level, 

| 117 

are identified in the table. There is support for the Hypothesis One (Representatives with training 

in mirroring will be more effective than those who are not trained). In this case, Group One 

(mirroring only) produced a larger percentage than the control group for ADefinitely will attend@ 

and for AProbably will attend@and smaller percentages for AProbably will not attend@and 

ADefinitely will not attend.@These results suggest that training in mirroring may have some merit 

in furthering sales representative productivity with small business-to-business prospects.. 

Further, there is support for Hypothesis Two (Representatives who are trained in empathy 

will be more effectives than those who are not trained). This is because Group Two acquired larger 

proportions than the control group for ADefinitely will attend@and AProbably will attend.@The 


AProbably will not attend@and ADefinitely will not attend@values were substantially lower than 

that of the control group. There is support, then, for the proposition that training in empathy has 

some merit for sales representatives. 

In addition, there is support for Hypothesis Three (Representatives who are trained in both 

mirroring and empathy will be more effective than those who are not trained, trained only in 

empathy or only in mirroring). Group Three has statistically significant percentages for 

ADefinitely will attend@and AProbably will attend@and its percentages for AProbably will not 

attend @and ADefinitely will not attend@are low, compared to the other groups. It appears that 

training in both mirroring and empathy may produce desirable synergistic effects for sales 

representatives. 

The analysis reported above was reinforced through an analysis of variance. Each of the 

| 118 

frequencies presented in Table One were considered as an element in this assessment. Table Two 

sets forth the results of the analysis. It is apparent that the differences between the groups are 

significant. 


In order to determine which groups generated results that differed from others, Tukey k 

tests were performed for each column in Table One. In turn, the test involves assessing the 

differences between the scores for each group. The Tukey k tests produced the same significant 

differences for the data in each column of the table as did the t tests discussed earlier. This 

supports all three of the hypotheses. 

The subjects self reported on what they perceived to be the value of the learning 

| 119 

experience which they underwent in taking the class during the semester. A straightforward metric 

was used to attain this end. Expressly the students were informed AWe want to measure the extent 

to which you feel that the training which you received in class this semester prepared you for 

conducting your selling task. On a scale of one to seven, where one signifies APrepared me very 

well@and seven signifies A@Did not prepare me very well,@how would you rate the training 

which you received in class? @Table Three sets forth the mean scores for the various groups.. 


For the perceived effectiveness measure described above, a Tukey K test indicates that 

the Group One mean value is significantly larger than that of Group Four, providing support 

for the first hypothesis (Representatives trained in mirroring will be more effective than those 

who did not receive this training). In addition, the Group Two mean value is significantly 

larger than that of Group Four, lending support for the second hypothesis (Representatives 

who are trained in empathy will be more effectives than those who did not receive this 

training). Finally, the Group Three mean is significantly greater than those for all of the other 

groups, and this finding is in conformity with Hypothesis Three (Representatives who are 

trained in both mirroring and empathy will be more effectives than those with no training, 

training only in empathy, or training only in mirroring). 

The three experimental group subjects were requested to assess the value of the training 

(outside of the regularly scheduled instruction) to which they were exposed. This appraisal 

occurred after they had already carried out their sales presentations. They were given a short 

| 120 


questionnaire which instructed them to rate this training in terms of: (1) How much did I learn 

| 121 

from this training? (2) What is the practical value of this training to me for my future job success? 

and (3) What was the value of this training in motivating me to achieve in selling? Previous 

studies have used these specific dimensions to evaluate the usefulness of alternative pedagogies 

(Peterson, 1995). The three constructs was assessed on a seven-point scale ranging from AVery 

little @to AVery much@. Table Four sets forth the results. The data indicate that Group Three 

generated the largest mean score. In turn, this score is significantly larger than the values for 

Groups One and Two, producing support for Hypothesis Three (Representatives trained in both 

mirroring and empathy will be more effective than those with no training, training only in 

mirroring or training only in empathy. It is apparent that the mean scores of Groups One and Two 

were not statistically different from one another. 


Discussion 

Both academic research and practice in the arena of personal selling is in a stage of 

continual change and reveals new concepts, strategies, tactics, and relationships on an ongoing 

| 122 

basis. Conversely, some of the more traditional techniques and methods tend to be abandoned or 

overlooked by researchers and sales representatives. Two such techniques are training in 

mirroring and empathy. 

This manuscript has focused on possible positive effects of training in mirroring and empathy 

and their joint contribution to prowess in selling to small business. The study which has been 

described suggested that both mirroring and empathy training have potential usefulness, 

especially when they are employed in tandem. In turn, the high consistency between the results 

of the three measures of student performance suggests that the research approach taken possesses 


an acceptable degree reliability and validity for the research approach. 

The outcome of the study suggests that mirroring and empathy instruction should be 

considered as a component in the educational and training programs undertaken by sales 

managers. It is not presumed that these two subjects should replace or lead to the de-emphasis of 

| 123 

more traditional and more widely-used topics and focal points, but that they can perform a useful 

supportive and reinforcing function. 

As was demonstrated in previous sections of this paper, mirroring may be most useful when 

it is employed as a enhancement and in accord with empathy. This being the case, training in the 

two processes can be undertaken through a synthesis, approach, where the two can operate in sinc 

and reinforce one another. The assumption that one can operate as a substitute for the other may 

be erroneous. 

This study had several limitations. Students enrolled in personal selling classes in one 

university setting, rather than professional salespersons, carried out the presentations. Further, 

they promoted a service which did not have a monetary price (The only expenses for the small 

business prospects were the time and effort which they would spend in attending the seminar). 

Thus, the setting was somewhat remote from Areal world@situations and cannot be generalized to 

all sales-to-small-business applications without reservation. In addition, the dependent variables 

were subjective, to some degree, and cannot be construed as completely exact and inclusive 

gauges of selling achievement. 

A latent limitation of the inquiry is that the composition of the experimental and control 

groups could have differed in to the extent that personal characteristics confounded the outcomes. 

The chosen course of action to prevent this development was to assign students to the groups in a 


andom manner, in an effort to moderate conceivable confounding from various points of origin 

It is recommended that further inquiries be undertaken in settings which more exactly 

resemble actual selling situations, using dependent variables which are likely to more exactly 

assess effectiveness in selling and which control for possible extraneous factors. Additional 

| 124 

research could focus on the most productive pedagogy for training in mirroring and empathy. For 

example, comparisons could be made, on the relative effectiveness of lecture, role playing, 

demonstrations, coaching, on-line programs, and other avenues for instruction. 

The measures on intentions to attend the seminar and those which required self-reporting 

on the part of the student/sales representatives furnished evaluation of the short-run effect of 

mirroring and empathy on sales performance and the value of the educational experience. Sales 

managers, especially those who desire extensive relationship building with customers, might 

desire measures of more enduring effects through the analysis of variables such as perceptions, 

attitude change, and relationship quality. Further, academic instructors of sales and sales 

management courses might desire the evaluation of more enduring variables. Future research 

might address these. 

The material covered in this paper can be relevant to a number of managers who are 

involved in selling to small business. Some guidelines and precautions apply to the subject 

matter, however. These follow: 

One set of suggestions applies directly to empathy training. Learning the practice of 

empathy can be particularly challenging, since this is more a philosophy, state of mind, and set of 

attitudes than it is a set of specific techniques which can be employed in a mechanistic fashion 

(Stock & Hoyer, 2005). Lectures and readings can be useful in the initial stages, but in order to 


fully master the practice, trainees must be highly involved and undergo training sessions where 

they are participative, rather than passive recipients of descriptive materials. Techniques which 

may be useful are group discussion, role playing script analysis, and case analysis. Often a 

| 125 

combination of two or more of these may be advantageous for sales managers who want to stress 

the mastery of using empathy. 

Other suggestions relate to training in both mirroring and empathy. Individual firms and 

companies within particular industries of course, may vary in the extent to which mirroring and 

empathy are included as components of their training programs. Sales managers with very 

restricted budgets may decide to focus primarily upon more traditional conveyance modes and 

restrict instruction in these two fields. It is recommended, however, that an attempt be made to 

furnish at least some cursory treatment of the two in their programs. 

The research described in this paper has suggested that training in mirroring and empathy 

need not be unduly time consuming, in order to produce positive results. Thus, even moderate 

focus on these topics may be worthwhile. The subjects in the study received only one hundred 

minutes of training (in both mirroring and empathy). Yet there is substantial evidence that this 

training had a favorable effect on their measured performance. This is not to say that extensive and 

continuing training is never needed, of course, but only to suggest that limited training efforts may 

be sufficient when time and/or funding resources are not in abundance. The research indicated that 

the experimental groups who were trained in either mirroring or empathy generated more 

favorable results than did the control group. In instances where training time and effort is very 

constrained and it is not possible to cover both topics, it may be desirable to include only one. 

Even very small firms who lack specialized training staff and budgets can effectively utilize 


mirroring and empathy schooling, for all practical purposes. These organizations may be in a 

position to employ role playing and on-the-job programs to furnish sufficient insights on these 

topics. Expensive trainers, consultants, and software are not necessarily required in order to 

implement the two subjects and may, in some instances, be replaced by more concrete and 

practical approaches. 

Sales managers who are actively engaged in recruiting new members of their sales forces 

may discover that the results of the study suggest means of achieving results that are in concert 

with their objectives. In this regard, recruits who have training and experience in mirroring and 

empathy, in academic or industry settings may have capabilities that set them apart from others 

who are not so endowed. Further, knowledgeable recruits may require only moderate or even no 

| 126 

further training in these fields (L’Herisson, 1981). Of course, training in these techniques is only a 

part of the desired background for new employees, but may be of significance in acquiring 

desirable candidates and furthering their performance in the field. 

It is possible that marketing executives who are not sales managers can discover that some 

of their subordinates could improve their performance as a result of mirroring and/or empathy 

instruction. Generalization of the results of the study to other functions may be possible, in some 

instances, although this extension is beyond the scope of the research set forth in this paper. 

Numerous marketing personnel, including those in advertising, product management, and 

customer service are responsible for convincing other individuals, both within and outside the 

company, to accept, reject, or modify their views, attitudes, and behavior. Brand managers, for 

instance, often possess very limited authority over those outside of their departments and in the 

ranks of important constituencies and must depend heavily upon their persuasive abilities to 


accomplish their major objectives. Merchandising managers or other executives who supervise 

the work of brand managers and assistant brand managers may find that such training is 

constructive. Virtually all marketing executives need persuasion in order to justify their 

| 127 

organization budgets to top management. In fact, few marketing positions are not, at least to some 

degree, in need of persuasive activity in dealing with subordinates, peers, and superiors. Thus, the 

training may be merited and well-worth the resources that are devoted to this activity. 

The recruiting, selection, and education of trainers are important functions. In turn, the 

trainers should be committed to the processes of mirroring and empathy and ideally have 

schooling or practical experience in these areas. Some professionals have only limited insights that 

bear upon these two functions and may require further instruction, if they are to have credibility 

and make useful contributions. For many firms, this is not an insurmountable barrier, as most sales 

managers probably realize that their trainers require additional upgrading with the passage of 

time. 

Robin Peterson is distinguished professor of marketing at New Mexico State University. He 

conducts research in small business, marketing, and business ethics. 

Bing Xu is a Ph.D. candidate in the department of marketing at New Mexico State University. She 

conducts research in small business, marketing, advertising, and consumer behavior. 

Yam Limbu is a Ph.D. candidate in the department of marketing at New Mexico State University. 

He conducts research in small business, marketing, international business, and retailing 


References 

Aggarwal, Praveen, Stephen B. Castleberry, David C. Shepherd, & Rick Ridnour (2005). 

ASalesperson Empathy and Listening: Impact on Relationship Outcomes,@Journal of Marketing 

Theory & Practice 13 (3), 16-31. 

Angera, Jeffrey & Edgar Long (2005). AQualitative and Quantitative Evaluations of an Empathy 

Training Program for Couples in Marriage and Romantic Relationships, @Journal of Couple & 

Relationship Therapy 5 (1), 1-26. 

| 128 

Bagozzi, Richard P. (2006). AThe Role of Social and Self-Conscious Emotions in the Regulation 

of Business-to-Business Relationships in Salesperson-Customer Interactions, @Journal of 

Business & Industrial Marketing 21 (7), 453-456. 

Barwick, Nick (2004). ABearing Witness: Group Analysis as Witness Training in Action,@Group 

Analysis 37 (1), 121-136. 

Batson, C. Daniel, David A. Lishner, Jennifer Cook, & Stacey Sawyer (2005). ASimilarity and 

Nurturance: Two Possible Sources of Empathy for Strangers, @Basic & Applied Social 

Psychology 27 (1), 15-25. 

Brems, Christiane, Donald K. Fromme, & Mark E. Johnson (1992). AGroup Modification of 

Empathic Verbalizations and Self-disclosure, @Journal of Social Psychology 132 (2), 189-200. 

Brownell, Eileen O. (1999). AMirror Mirror on the Wall...Help Me Communicate With Them 

All, American Salesman 44 (12), 9-16. 

Carree, Martin, Andre Van Stel, Roy Thurik, & Sander Wennekers (2007). AThe Relationship 

Between Economic Development and Business Ownership Revisited, @Entrepreneurship & 

Regional Development 19 (3), 281-291. 

Carter, Terri (2001). “”More Lawyers are Using Neurolinguistics to Present Their Cases to 

Juries, with Winning Results,” ABA Journal 87 (9), 44-53. 

Comer, Lucette B. & Tanya Drollinger (1999). AActive Empathetic Listening and Selling 

Success: A Conceptual Framework, @Journal of Personal Selling & Sales Management 19 (1), 

15-29. 

Cotton, B. & .-Ch Cachon (2007). AResisting the Giants: Small Retail Entrepreneurs Against 

Mega-Retailers BAn Empirical Study,@Journal of Small Business & Entrepreneurship 20 (2), 

135-149. 


| 129 

Coulter, Keith S. & Robin A. Coulter (2003). AThe Effects of Industry Knowledge on the 

Development of Trust in Service Relationships, @International Journal of Research in Marketing 

20 (1), 31-43.de Vries, Rsianfred & F.R. Kets (1989). AThe Leader as Mirror: Clinical 

Reflections, @Human Relations 42 (7), 607-623. 

Diksterhurt, Arthur, Donald E. Smith, Nathan H. Van Buren, & Darrell H. Wigholes, 2005. AThe 

Unconscious Effects of the Environment on Consumer Behavior, @Journal of Consumer 

Psychology 15 (1), 193-202. 

Dobel, Christian, Heidi Gumnior, Jens Bolte, & Pienie Zwisterlood (2007). ADescribing Scenese 

Hardly Seen, @Acta Psychologica 125 (2), 129-143. 

Dodgson, Mark (2003). AOrganizational Learning: A Review of Some Literatures,@ 

Organization Studies 43 (2), 26-42. 

Dowdy, Clare (2006). AHammering it Home,@Design Week 21 (1), 23-24. 

Edwards, Cliff (2006). ADeath of a Pushy Salesman,@Business Week 3391, 77-81. 

Ellegaard, Chris (2006). ASmall Company Purchasing: A Research Agenda,@Journal of 

Purchasing & Supply Management 12 (5), 272-283. 

AFamily Biz Proliferates,@Journal of Accountancy 202 (6), 15-16. 

Fracero, Kenneth E. (2006). ABuilding Relationships Powered by Empathy,@Contract 

Management 46 (8), 4-6. 

Fraley, R.C. & P.R. Shaver (1998). AAirport Separations: A Naturalistic Study of Adult 

Attachment Dynamics in Separating Couples, @Journal of Personality and Social Psychology 75 

(4), 1198-1212. 

Gadberry, Sharon (1993). AThe Art of Interviewing,@Financial Analysts Journal 49 (2), 25. 

Gill, Amarjit S., Alan B. Flaschner, & Mickey Shachar (2006). AFactors that Affect the Trust of 

Business Clients in Their Banks, @International Journal of Bank Marketing 24 (6), 384-405. 

Golen, Annis G. (2002). ASpeaking of Work and Family: Spousal Collaboration on Defining 

Role-Identifies and Developing Shared Meanings, @The Southern Communication Journal 67 

(2), 122-141. 

Hakansson, Jakob & Henry Montgomery (2003). AEmpathy as an Interpersonal Phenomenon,@ 


Journal of Social & Personal Relationships 20 (3), 267-284. 

Holm, Olle (1997). ARatings of Empathic Communication: Does Experience Make?@Journal of 

Psychology 131 (6), 680-682. 

Ingram, Thomas A., Charles H. Schwepker, Jr. & Don Hutson (1992). AWhy Salespeople Fail,@ 

Industrial Marketing Management 21 (3), 225-230. 

Joireman, Jeffrey A., Tami Lynn Needham, & Amy Lynn Cummings (2002). ARelationships 

Between Dimensions of Attachment and Empathy, @North American Journal of Psychology 4 

(1), 63-82. 

Kerem, Efrat, Nurit Fishman, & Ruthellen Josselson (2001). AThe Experience of Empathy in 

Everyday Relationships: Cognitive and Affective Elements, @Journal of Social & Personal 

Relationships 18 (5), 709-729. 

L=Herisson (1981). AMaking the Most of Your Intuition,@Training and Development Journal 

21 (2), 35-41. 

Lin, Neng-Pai, Hung-Chang Chiu, & Yi-Ching Hsieh (2001). AInvestigating the Relationship 

Between Service Providers =Personality and Customer Perceptions of Service Quality Across 

Gender, @Total Quality Management 12 (1), 57-67. 

Lockhart, Rebecca, Ron French, & Barbara Gench (1998). AFrom the Field Influence of 

Empathy Training to Modify Attitudes of Normal Children in Physical Education Toward Peers 

with Physical Difficulties, @Clinical Kinesiology: Journal of the American Kinesiotherapy 

Association 52 (2), 11-18. 

Manning, Gerald L. & Bruce L. Reece (1992). Selling Today: An Extension of the Marketing 

Concept Boston: Allyn & Bacon, 76. 

Manusov, Valerie (1993). AIt Depends on Your Perspective: Effects of Stance and Beliefs about 

Intent on Person Perception, @Western Journal of Communication 57 (1), 27-41. 

Martz, Erin (2001). AExpressing Counselor Empathy Through the Use of Possible Selves,@ 

Journal of Employment Counseling 38 (3), 82-87. 

Mayer, David & Herbert M.Greenberg (2006). AWhat Makes a Good Salesman?@Harvard 

Business Review 84 (8), 164-171. 

| 130 


Moore, James R., Donald S. Eckrich, and Loory Thompson Carlson (1986). AA Hierarchy of 

Industrial Selling Competencies, @Journal of Marketing Education 22 (2), 79-99. 

Mowatt, Jeff (2006). AMirror Mirror,@Kitchen & Bath Business 53 (6), 48. 

Murphy, Sheila E. (1987). AMirroring Instructional Technique: A Process Evaluation Model,@ 

Training & Development Journal 41 (6), 104-108. 

Nerdrum, P. & M.H. Ronnestad (2003). AChanges in Therapists Conceptualization and Practice 

of Therapy Following Empathy Training, @The Clinical Supervisor 22 (2), 37-62. 

Nichols, Ralph G. & Leonard R. Stevens (1957). AListening to People,@Harvard Business 

Review 35 (4), 112-119. 

Peterson, Robin T. (1995). ALife History Study for the Personal Selling Process,@Marketing 

Education Review 5 (3), 11-19. 

| 131 

Persson, Per, Jarmo Laaksolahti, & Peter Lonnqvist (2001). AUnderstanding Socially Intelligent 

Agents BA Multilayered Phenomenon,@IEEE Transactions on Systems, Man & Cybernetics: Part 

A 31 (5), 349-361. 

Pisani. Roco, Guuseppina Colangeli, Antonella Giordani, & Paola Popolla (2006), “The Median 

Group: Training and Supervision,” Group Analysis 39 (4), 537-548. 

Preston-shoot, Michael, Imogen Taylor, & Joyce Lishman (1999).@Learning to Learn in Social 

Work, @Social Work Education 18 (2), 117-119. 

Rand, Marjorie L. (2006). APostural Mirroring: Conscious and Unconscious,@Annals of the 

American Psychotherapy Assn 9 (3), 38-51. 

Rasmusson, Erika (2000). AThe 10 Traits of Top Salespeople,@Journal of Personal Selling & 

Sales Management 20 (1), 75-87. 

Rauyruen, Papassapa & Kenneth E. Miller (2007). ARelationship Quality as a Predictor of B2B 

Customer Loyalty, @Journal of Business Research 60 (1), 21-31. 

Schwebel, David C. & Milton Schwebel (2002). ATeaching Nonverbal Communication,@ 


College Teaching 50 (3), 88-92. 

Smith, Adam (2006). ACognitive Empathy and Emotional Empathy in Human Behavior and 

Evolution, @Psychological Record 56 (1), 3-21. 

Smith, Stephen L. J. (2006). AHow Big, How Many? Enterprise Size Distributions in Tourism 

and Other Industries, 

@Journal of Travel Research 45 (1), 53-58. 

Stock, Ruth Maria & Wayne D. Hoyer (2005). AAn Attitude-Behavior Model of Salespeople=s 

Customer Orientation, @Journal of the Academy of Marketing Science 33 (4), 536-552. 

Sturmer, Stafan, Mark Snyder, & Allen M. Omoto (2005). Prosocial Emotions and Helping: The 

Moderating Role of Group Memberships, @Journal of Personality & Social Psychology 88 (3), 

532-546. 

Van Swol, Lyn M. (2003). AThe effects of Nonverbal Mirroring on Perceived Persuasiveness, 

Agreement with an Imitator and Reciprocity in a Group Discussion, @Communication Research 

30 (1), 460-480. 

| 132 

Van Zeiji, Jantien, Judi Messman, Marinus H. Van Ijzendoorn, Marian J. BakermansKranenburg, 

Femmie Juffer, Mirjam N. Stolk, Hans M. Koot, & Lenneke R.A. Aink (2006). 

AAttachment-Based Intervention for Enhancing Sensitive Discipline in Mothers of 1-to 3yearOld 

Children at Risk for Externalizing Behavior Problems BA Controlled Trial,@Journal of 

Consulting and Clinical Psychology 74 (6), 994-1005. 

Weinberg, Haim & Miki Toder (2004). AThe Hall of Mirrors in Small, Large, and Virtual 

Groups, @Group Analysis 37 (4), 492-507. 

West, Mark (2006). ABusiness Relationships Opportunities Waiting to Happen,@British Journal 

of Administrative Management 51 (1), 17. 

Wong, Amy & Amrik Sohal (2002). ACustomers=Perspectives on Service Quality and 

Relationship Quality in Retail Encounters, @Managing Service Quality 12 (6), 424-433. 


Public Relations Entrepreneurs – 

Satisfaction, Motivations, and Challenges 

Betsy Hays 

California State University, Fresno 

Fresno, California 91740 

Email: bhays@csufresno.edu 

Shannon Ritchey – Escovedo 

California State University, Fresno 

Fresno, California 91740 

| 133 


Abstract 

To further explore the areas of satisfaction, motivations, and challenges among public 

relations entrepreneurs, 21 students in a public relations entrepreneurship course at California 

State University, Fresno conducted 75 in-depth interviews with public relations entrepreneurs 

with 25 or fewer employees throughout the United States. Those surveyed were largely satisfied 

with their entrepreneurial ventures and with the size of their firms. Greatest achievements cited 

were successfully running their firms, representing major clients, and being a good employer. 

Motivations for pursing entrepreneurship included a yearning for freedom, flexibility, and a 

long- 

| 134 

held desire to be their own boss. Challenges noted were time management, managing employees, 

and finances (billing, rate setting, and collections). An overwhelming majority (94%) indicated 

that they would become public relations entrepreneurs all over again, though 48% believe they 

have no balance between their personal and professional lives. 

Introduction 

An entrepreneur has been described as “one who organizes, manages, and assumes the risks 

of a business or enterprise” (Woolf, H.B., 1980, p.378). The public relations field is full of 

entrepreneurs – solo practitioners and others running public relations firms. The U.S. Census 

Bureau lists the number of public relations agencies (firms) as 6,563 (U.S. Department of 

Commerce, 2006). Those currently practicing in the field – close to 400,000 according to some 

researchers’ estimates (Falconi, 2006) – could be considered potential entrepreneurs, as the typical

path for public relations practitioners includes some time in the field working for someone else 

before to becoming one’s own boss. 

While public relations entrepreneurship is not new, as public relations firms have been 

around since the early 1900s, the study of public relations entrepreneurship appears to be, as few 

| 135 

studies can be found, and those found are recent. Hazelton and Rayburn (2005, 2007), for example, 

are among those that have conducted studies; theirs relate to solo public relations practitioners. The 

growing interest in studying public relations entrepreneurship from an academic perspective could 

partially be due to a shift in mindset of the public relations entrepreneurs themselves. Croft (2006) 

has suggested that “This new breed of entrepreneurs are more serious about the business of the 

business than were their predecessors. They are in business to make money and they want to see 

their hard work rewarded” (p. xiv). Increased interest in studying public relations entrepreneurship 

could also be related to the growth in entrepreneurship education in general and its burgeoning 

body of research. 

Public relations entrepreneurs who are not solo practitioners, especially those with firms 

that have 25 or fewer employees, have been largely ignored by existing research. Little is known 

about their levels of professional satisfaction, motivations, and challenges. This study begins to 

explore the world of public relations entrepreneurship in an effort to create knowledge helpful to 

those who are already public relations entrepreneurs, as well as those looking to embark on the 

adventure. This study, along with others, will provide a body of knowledge useful to current and 

future public relations entrepreneurs, strengthening the industry and leading to increased success.

Literature Review 

Several studies have been conducted regarding employee satisfaction, motivations, and 

challenges in general, and in fields other than public relations. Hertzberg and his colleagues’ 

(1959) work on the duality theory of motivators and hygiene factors is among the most oft-cited 

research. They identified six factors, called “motivators,” that can increase job satisfaction – 

achievement, recognition, the work itself, responsibility, advancement, and growth. They also 

identified six challenges, called “hygiene factors,” that can decrease job satisfaction. These 

include company policy and administration, supervision, relationship with supervisor, work 

conditions, salary, relationships with peers, personal life, relations with subordinates, status, and 

security (Hertzberg, 1959). 

Satisfaction 

| 136 

Smerek and Peterson’s conceptual model suggests that job satisfaction is contingent upon 

three factors: “(1) whether a job meets expectations, (2) is close to an ideal job, and (3) how 

satisfied a person is with their job” (p. 234). Among the conclusions that emerged from their study 

of non-academic university employees, variables related to perceived work environment are more 

important than personal characteristics or job characteristics in predicting job satisfaction. The 

work itself was found to have the most powerful and signification predictor of job satisfaction, and 

opportunity for advancement and responsibility were also significant predictors (Smerek and 

Peterson, 2007). In their study of licensed social workers, Cole, Panchanadeswaran and Daining

| 137 

(2004) found that perceived quality of supervision and perceived workload were predictive of job 

satisfaction. A study of the hospitality industry found that the work itself, supervision, and 

promotion determine the level of overall job satisfaction (Tutuncu and Kozak, 2007). When 

workers in any field, including entrepreneurs and those working in public relations, are satisfied 

with their jobs, they tend to be happier and more productive. 

Motivation 

Regarding motivation, Skemp-Arlt and Toupence (2007) describe motivation as the 

mechanism that reduces the distance between a person’s actual state and desired state of being. 

Motivation includes “concepts such as need, incentive, reward, reinforcement, goal setting, and 

expectancy” (pg. 28). Maslow’s view of motivation is based on his established hierarchy of needs: 

basic physiological, safety, and security; social affiliation/belonging, esteem, and self-actualization 

(Maslow, 1943). His theory contends that when lower-level needs are met, higher-level needs 

emerge. Hartog and Belschak’s 2007 work found a correlation between commitment to the 

organization and personal initiative, and team and organizational commitment are also relevant. 

Specific to entrepreneurship, researchers have identified several motivators for embarking 

on one’s own business enterprise. These include the desire for the freedom that comes from self- 

management and potential monetary rewards (Kemelgor, 1985). Environmental alertness (the 

ability to recognize and exploit opportunities) is among the motivators uncovered by Das and 

Bing-Sheng (1997). Other factors they discovered include “need for achievement,” “tolerance of 

ambiguity,” “internal locus of control,” and “risk propensity” (pg. 70). Other research has found

| 138 

that many entrepreneurs have entrepreneurial parents (Dyer 1994), that entrepreneurship can be a 

response to a life event, such as a layoff or dissatisfaction with a current work environment due to 

downsizing (Miner, 1997 and Ennico, 2003), and that, among women, the desire to balance work 

and family often leads to entrepreneurship (Demartino and Barbato, 2003). A qualitative study of 

ethnic minority entrepreneurs in the United Kingdom found that a lack of satisfaction in working 

for others, the need to be one’s own boss and achieve more, and the prospect of higher earnings 

were the main motivators for their entrepreneurial ventures (Hussain, et. al, 2007). This research 

also found that graduates from non-business disciplines were more likely to engage in 

entrepreneurship. 

Challenges 

Regarding challenges, Reynolds and Whigham-Desir (1995) established case studies that 

suggest solutions to four identified challenges to growing a small business. The challenges they 

identified include keeping a marketing strategy current, rapid expansion, partner disagreements, 

and breaking in to new markets. 

According to Dedhia (1995), other challenges to entrepreneurship arise from changes in 

the political, social, economic, cultural, and business environments. Such changes include 

“customer demand and satisfaction, corporate image an culture, quality level of product and 

service, profitability and satisfying shareholders/stakeholders, management of change, global 

market and competition, government rules and regulations, environmental impact,

communication, new technology, workforce diversification, and information management” (pg. 

266). 

While the existing body of research in satisfaction, motivation, and challenges is useful, 

none of it relates specifically to public relations entrepreneurs. Looking at these areas with a 

specific industry in mind provides a more finely-tuned perspective that becomes more valuble 

to those who are practicing in or looking to practice in the field. Specifically, as university 

courses in public relations entrepreneurship continue to emerge, research specific to public 

relations entrepreneurs will provide faculty with a solid base of data from which to teach. 

Currently, California State University, Fresno is the only college and university that has 

introduced a public relations entrepreneurship course into its curriculum. As such, this study 

attempts to broaden knowledge in this area by attempting to answer the following research 

questions, which encourage current public relations entrepreneurs to reflect on their thoughts 

| 139 

regarding the path of their business and the size of their business with regard to number of clients 

and employees (satisfaction), explore why they became their own boss and how they chose the 

size of their business (motivations), and discuss challenges and ways to overcome them 

(including the oft-discussed work/life balance challenge): 

Satisfaction research questions 

RQ1: How satisfied are public relations entrepreneurs with the sizes of their companies? 

RQ2: What do public relations entrepreneurs believe are their favorite parts of running their 

business?

RQ3: What do public relations entrepreneurs believe are their greatest accomplishments? 

RQ4: Knowing what they know now, would public relations entrepreneurs do anything 

differently with respect to their firm? 

Motivation research questions 

RQ5: Why do people become public relations entrepreneurs? 

RQ6: How do public relations entrepreneurs decide on the size of their companies? 

Challenges research questions 

RQ7: What do public relations entrepreneurs believe to be the most challenging aspects of 

running their own business? 

RQ8: What do public relations entrepreneurs believe are their greatest mistakes? 

RQ9: How do public relations entrepreneurs overcome professional disappointment? 

RQ10: How do public relations entrepreneurs achieve work/life balance? 

Sample 

Methods 

A total of 75 public relations entrepreneurs were interviewed for this study, with 48% 

| 140 

being male, 49.3% being female, and 2.7% not answering the question. Two-thirds (66.7%) were 

married, 32% were unmarried, and 1.3% of the respondents did not provide this information. 

Regarding children, 57.3% of respondents had at least one child and 41.3% did not, with 1.3% 

missing data. About a third (32%) worked for a public relations agency prior to going out on 

their own, 18.7% worked “in-house” for one organization, and 34.7% worked both in-house and

for an agency, with 13.3% missing data. More than 8 in 10 (81.3%) say they will never work for 

anyone else again and 12% said they would, with 1.3% missing data. Of respondents, 41.3% are 

sole proprietorships, 28% are corporations, 22.7% are classified as limited liability companies 

(LLCs), and 6.7% are partnerships, with 1.3% missing data. Almost half (49.3%) are members 

of the Public Relations Society of America and 48% are not, with 2.7% missing data. Just about 

| 141 

two-thirds (65.3%), have a mentor and 34.7% do not, with no missing data. Respondents work an 

average of 49.77 hours per week. They average 6 employees, with a range from 0 to 25. They 

had an average of 13 clients, with a range from 2 to 42. Table 1 provides additional information 

about the respondents. 

Procedures 

In-depth interview questions were developed by the professor and students in a public

elations entrepreneurship class at California State University, Fresno during the spring 2008 

semester. Each of the 21 students were trained in interview techniques and was assigned a city, 

state, or region, and charged with conducting in-depth interviews with public relations 

entrepreneurs with 25 or fewer employees. The following states were represented in the study: 

Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Ohio, Oregon, Pennsylvania, 

Nevada, New York, Tennessee, Texas, Wisconsin, and Washington. Public relations 

entrepreneurs in each area were located through online searches. In total, 75 interviews were 

| 142 

conducted between March and April 2008. Most interviews were conducted by phone, with a few 

in-person, and a few via email. Participation in the study was voluntary and individual responses 

were kept confidential. 

Measures 

The question set was created using a compilation of questions the students developed 

based on what knowledge they wanted to acquire from public relations entrepreneurs. (Script and 

survey instrument are found in Appendix A.) The questions were pre-tested on local public 

relations entrepreneurs. The survey was comprised of 41 questions, 16 of which were intended to 

generate quantitative responses and 25 of which elicited more in-depth, qualitative answers. 

These questions were generated to answer the research questions mentioned earlier in the text. 

Interview questions included, “Are you satisfied with the size of your business, or would you 

like to change it in some way?”, “Why did you start your company?”, “How did you decide on 

the current size of your company?”, and “What are the most challenging parts of running your 

own PR business?” Each researcher followed the same script, in accordance with the regulations

| 143 

of the Human Subjects Review Board at California State University, Fresno. Basic demographic 

information was collected. Open-ended, in-depth questions followed the demographic questions. 

These items focused on the respondents’ motives for being public relations entrepreneurs, 

motives for the size of their firms, and keys to their success as business owners. Information was 

also sought regarding how they market their firm, advice for future public relations 

entrepreneurs, and how they achieve balance between their personal and professional lives. Each 

interview took approximately 35 minutes to complete. Notes on each in-depth interview were 

transcribed for analysis. 

Results 

Satisfaction with Public Relations Entrepreneurship 

In exploring research question 1, how satisfied are public relations entrepreneurs with the 

sizes of their companies, it was found that a majority of the public relations entrepreneurs 

interviewed were satisfied with the size of their businesses. According to the quantitative portion 

of the survey, sixty-three percent are satisfied with the size of their business and 28% are not, 

with 9.3% missing data. However, during the in-depth interview portion of the survey, this 

percentage jumped to 94% satisfaction (of those that responded): 39 of those interviewed said 

they were completely satisfied with the size of their company, 27 entrepreneurs said they were 

satisfied with the current size of their business but would like to see their firms grow in the 

future, and only four public relations entrepreneurs were not satisfied with the size of their 

companies. Two of them wanted to shrink their businesses, while the other two wanted to grow 

their firms. As one such entrepreneur voiced, “Grow or die, that’s the rule.”

| 144 

Of the public relations entrepreneurs that were satisfied but would like to see future growth, 

several explained that they wanted their companies to grow to meet the current market demands: 

“We have grown as the client base has grown. I never envisioned we would be this large, and we 

are still growing.” Others felt they could grow because their businesses were more established 

and that they had a better understanding of how to manage a firm. A few mentioned that future 

growth was dependent on revenue and/or the continuance of individual contact with clients. 

Several common themes developed in looking at research question 2, which explores 

what public relations entrepreneurs believe are their favorite parts of running their business, 

which is closely related to job satisfaction. Some respondents listed more that one favorite, and 

responses are quantified in Table 2. Public relations entrepreneurs across the board enjoyed being 

independent and the freedom to be one’s own boss, including having creative control over 

business decisions, being directly rewarded for business successes, and having the ability to run 

their firms as they see fit: “I’m an independent person and I like doing things my own way.” 

Respondents also noted flexibility as a favorite element in running their own businesses, 

especially in terms of the ability to set working hours around their busy schedules or time with 

their families. Many public relations entrepreneurs also enjoyed the challenge and variety of 

their jobs, helping others, and working with people, as did this respondent: “[My favorite parts 

are] the flexibility and variety of work. I am never bored, my clients are first class, and I feel 

like I add value to others’ day and/or company. I get paid according to how hard I work, and 

love meeting new people in the industry.”

Several common threads were found while exploring research question 3, what public 

relations entrepreneurs believe are their greatest accomplishments. Several noted that starting 

and managing their own successful business was the best thing they’re ever done as a public 

relations entrepreneur; others mentioned serving major clients, being a good employer, making 

good business decisions, and helping in the community. Sixteen people cited major clients as the 

| 145 

best thing they did as a public relations entrepreneur. A majority of these clients were celebrities 

or well-known firms – one interviewee even had the opportunity to represent a Pope – but some 

business owners noted that simply keeping their clients happy was their biggest accomplishment. 

Another popular answer was developing great employees and providing jobs for people.

Comments included, “The best thing I’ve done is develop professional employees. Every one of 

my former employees will tell you that this was the best, most rewarding job they ever had,” and 

“I love watching the team grow in skills and experience whether they are currently employed 

with [my business] or have moved on for bigger and better opportunities. My relationships have 

been long-lasting and I am proud to play a small role in the development of such talented 

individuals.” 

Some of the business decisions that were noted as great accomplishments were in regard 

| 146 

to financial decisions, hiring and firing of employees, and making changes to the company’s size. 

One noted that they needed to shrink their number of employees to keep their business more 

manageable; others felt they needed extra help running their firm and took on more employees. 

Entrepreneurs who felt that helping out in their communities was their biggest 

accomplishments often served non-profit organizations or charities, “We help organizations that 

really need help. They have a story to tell, but don’t know what to do to call attention to their 

work.” Others helped clients with marketing or internal issues: “[I] helped a client get out of 

some serious internal problems and get them back to being a respectful company.” Some 

interviewees also noted they enjoy helping startup companies grow to meet their goals. 

In answering research question 4, knowing what they know now, would public relations 

entrepreneurs do anything differently with respect to their firm, 94% of those interviewed 

indicated that they would do it all again. This indicates that they are very satisfied with their jobs, 

their firms, and the choices they have made in getting involved with public relations 

entrepreneurship. While most public relations entrepreneurs said that they would not have

changed anything with respect to their firms, five themes emerged from those who would have 

| 147 

championed change. Ten percent of those who wanted to do something differently wanted to deal 

with problem clients in a different fashion. An additional 10% said that they would have started 

networking earlier to build a larger client base. Another 10% felt that they would have benefited 

by working at their agency longer before becoming public relations entrepreneurs. 

Of those who would change something related to their firm, the reverse was also true; another 

10% of respondents felt they should have started their business sooner. Finally, 10% of those 

who would make changes mentioned that they should have “listened to their gut feelings more” 

with respect to their companies, instead of relying on the advice of others. Answers are 

quantified by response in Table 3.

Public Relations Entrepreneur Motivations 

In exploring research question 5, why people become public relations entrepreneurs, 

several factors emerged and many respondents listed several reasons. (Answers listed by number 

of responses are included in Table 4.) First, many entrepreneurs had wanted to be their own boss 

for a long time; it had been their dream to own their own businesses. Second, many 

entrepreneurs mentioned that they had started their own businesses because it had been a shrewd 

business decision at the time. Third, several public relations entrepreneurs started their own 

| 148 

businesses because they had been laid off from their previous place of employment and preferred 

starting their own business to finding a new job. These findings are also consistent with existing

literature about motivations for becoming an entrepreneur. 

Twenty-six of those interviewed had always wanted to be an entrepreneur. Several of 

these respondents had friends or family members who had been or still are entrepreneurs, which 

influenced their decision to start their businesses. “My family is full of entrepreneurs and I 

always knew I wanted to be one as well, I just had to decide what line of work I wanted to do,” 

said one respondent, “Once I got into PR, I knew it was for me, because I wanted to be around 

my interests and this was a great way to do that.” Another respondent had similar feelings. “I 

always wanted to be self-employed. It was during an economic recession and it was hard to find 

a job. I always wanted flexibility and autonomy.” 

| 149

| 150 

Twenty-five respondents said they became public relations entrepreneurs because it was a 

smart business decision and the timing had been favorable. “[I] decided that if I was doing it for 

someone else and wasn’t getting paid well, why not just do it for myself and not get paid for a 

while, but start to build something,” said one respondent. Eight people started their business after 

their employment had been terminated at their previous job. 

Several public relations entrepreneurs said they were frustrated working for someone else 

because they had little or no creative control and were not given proper credit for their efforts. 

One respondent noted, “I wanted to get into the business for myself, and I hated having to take 

directions and do everything without all the rewards.” Fifteen people said they became 

entrepreneurs because they wanted to be in charge. Another 13 said they wanted the challenge of 

running their own business. Other reasons cited by respondents for becoming public relations 

entrepreneurs included wanting to do a better job or make more money, being compelled to fill a 

niche or market demand, having a love for the business, and desiring more freedom, flexibility, 

and independence. Respondents also said they enjoyed being able to choose their own clients and 

help people. One entrepreneur simply stated, “I wanted to explore my own desires and dreams.” 

In regards to question 6, several themes developed in terms of what determines the size of 

public relations entrepreneurial businesses. The most common response, with about 1/3 of the 

respondents (22 individuals) was that market demand is ultimately what determines business 

size. Additionally, several business owners noted that owning a small business was the best 

because fewer employees and clients are easier to manage. Comments included, “I didn’t decide 

it, the market did, based on clients,” and “partly the market… it’s easier to manage with fewer

employees. I can make as much money personally without the overhead liabilities.” Another 

said, “Supply and demand. It depends on what is needed. We don’t want to be huge because we 

are more able to manage things better the way we are now.” Others said that staying small 

allowed them to continue being “hands-on” and personally involved with their clients. A few 

mentioned that they preferred to keep their businesses smaller so that they would not have to lay 

off any employees. Flexibility was also a factor. Another commented, “We didn’t want to be 

responsible for employees and their livelihood. We wanted to benefit from the income. We both 

had young kids at the beginning and wanted to have flexibility in our jobs.” 

Challenges for Public Relations Entrepreneurs 

For research question 6, what do public relations entrepreneurs believe to be the most 

challenging aspects of running their own business, three categories were found: time 

management, employee management/hiring, and financial challenges. Very few entrepreneurs 

mentioned being alone and not under a corporate umbrella as a business challenge, though a few 

| 151 

mentioned that keeping up with changing technology was an issue. Financial challenges included 

collecting fees, charging enough, and paying taxes. Others also mentioned that the inconsistency 

of paychecks was a financial challenge. Also, managing the financial aspects of a public 

relations business seemed a relatively common problem. Some respondents gave more than one 

answer, and challenges are listed by number of responses in Table 5.

While the vast majority of public relations entrepreneurs agreed that being one’s own 

boss is a great experience, it often means you are also the boss of others. Hiring and firing of 

| 152 

employees was cited as a business challenge, along with various administrative managerial tasks, 

such as taking care of employees and scheduling employee time off. For many public relations 

professionals, finding a loyal and reliable staff was the biggest challenge. As one respondent 

said, "Managing people [is a challenge]. I love my job; I just don't love the business." 

The final major challenge to public relations entrepreneurs was time management. It is 

difficult for many public relations professionals, especially those who work long hours and have 

many clients, to juggle business scheduling and also set aside time to be with their families.

According to one entrepreneur, "Managing my time on a day-to-day basis is the toughest part.” 

Three themes emerged in examining research question 8, what do public relations 

entrepreneurs believe are their greatest mistakes – those involving employees or partners, those 

involving clients, and those involving finances. Mistakes involving employees was a common 

answer when it came to mistakes. Many entrepreneurs commented that they did not go with 

instinct when hiring or kept an employee on for too long. “[A mistake] early on: not being 

decisive in changing some staff and firing people, following instinct.” Another issue with 

employees was letting friendships get in the way of business. Taking on a partner also fell into 

this category; as entrepreneurs expressed that a partner was not good for them or their firm. 

Issues involving clients was also a common thread in the answers for this question. 

Many said that they took on a client that they disliked or were not passionate for and that 

hindered their work and the relationship. “[My biggest mistake is] continuing to work with 

people who I don’t like and who lack a moral compass.” Usually, the public relations 

entrepreneurs took on these clients as an opportunity for publicity or more money, but soon 

ended up regretting their decisions. “[My biggest mistake was] taking a client I hated because it 

was a big chance for me to get big press and it turned bad fast.” Others expressed remorse for 

passing a client on or referring them to another firm that did not satisfy the client’s needs. 

Eleven people reported financial mistakes. The most common financial mistake was 

charging too little for services. Many entrepreneurs felt they had underestimated themselves and 

not charged an adequate amount for their assistance. In addition, one entrepreneur said that their 

biggest mistake was not hiring an accountant soon enough. 

| 153

Research question 9 explored how public relations entrepreneurs overcome professional 

disappointment. During the course of this study, it was found that the most common answer 

(from 41% of those interviewed) was that entrepreneurs bounce back from a professional 

disappointment by learning from the mistakes made and moving on. Several mentioned that they 

remember not to take the professional disappointment personally. Also, although the 

interviewees analyze what might have gone wrong, they prefer to focus less on their failures and 

more on their successes and future prospects. Illustrative comments included, “I just remember 

what I have achieved and put into prospective that you can’t win them all,” and “I analyze why 

we failed and how we failed and I try to make sure that we don’t make the same mistake again 

next time. I usually don’t like to focus on failures too long though. It brings down our morale. 

I’d rather celebrate success stories.” 

Several respondents also mentioned that they try to relax, talk to a friend, spouse, or 

family member, schedule time off from work, exercise, or participate in a game or a sport to get 

their mind off their disappointment. Others felt the need to jump immediately into the next 

project. As one respondent said, “[I] cover up for lost ground, and do so in a hurry! [I] prove I 

can do excellent work ASAP, and put in an extra effort.” 

In exploring research question 10, how public relations entrepreneurs achieve balance 

between their personal and professional lives, it was found that almost half of those interviewed 

| 154 

(48%) felt that they had no balance. (A complete list of answers by number of responses is found 

in Table 6).

This feeling of no balance was largely attributed to hectic schedules and long work 

weeks. The average number of hours worked per week was 49.77, with the range from 5 to 100. 

Males tended to work more hours per week than females, approximately 53 hours per week as 

opposed to approximately 46 hours per week. An independent samples t-test was conducted and 

found differences approaching significance in how many hours males (M= 53.22, SD= 16.73) 

and females (M= 46.46, SD= 12.79) work per week in their public relations businesses, t (71), 

1.94, p= .056. 

While the public relations entrepreneurs who felt they had a balance between their 

personal and professional lives noted it was “with great difficulty,” most attributed this balance 

| 155 

to compartmentalization and scheduling, as indicated by this respondent’s comment: “When you

| 156 

are at work, be fully at work. When you’re with your family, be fully with your family. And keep 

commitments to your family as religiously as you do meetings with your clients. Maintain a 

detailed schedule to allow all this to happen.” Separating “work time” and “family time” was 

considered important to achieving balance. As one interviewee pointed out, people have only 

one family and many clients. The flexibility of choosing one’s own hours also helped public 

relations entrepreneurs achieve balance, especially those with children. As one respondent 

indicated, “Family always comes first. My clients understand that I’m a mom and I need to take 

my kids to school and appointments. Other than that, my clients sometimes come before me, 

especially when it comes to my fun.” 

Several of those interviewed mentioned that scheduling regular vacations, leaving the 

country, or being away from technology were good ways to achieve balance. Respondents said 

things like, “Leaving the country where phones and computers do not work is the best way. Or I 

have to have my husband force the phone away.” Other interviewees noted that exercise, yoga, 

or being involved with sports helped, “I work out a lot. You need to be in good shape to work 

many hours and survive in this crazy business.” Some public relations professionals mentioned 

that young businesses required more time than established ones to get off the ground, but that 

one must guard against “burn-outs.” Another answered, “There is no down time when you own 

your own business.” 

Study Limitations and Areas of Further Research 

While the study points to some themes and provides insight into the satisfaction, 

motivations, and challenges of public relations entrepreneurs, because it was a qualitative study

| 157 

one may not extrapolate the findings to the entire population. In addition, not all states and major 

population centers were represented, and further research should try and cover the geographic 

areas not researched in this study. A further limitation was using students as the research 

surveyors. While trained extensively, it was the first time many of the students had conducted 

this type of research. As such, there were pieces of missing data (i.e. not all interviewees 

answered all of the questions). 

As far as future research, additional analysis of the other data gathered in this study 

would be of value, especially those questions regarding keys to success in public relations 

entrepreneurship. In addition, further and more deeply probing research questions of public 

relations entrepreneurs with firms of different sizes would add to the growing body of knowledge 

regarding public relations entrepreneurship. 

Conclusion 

Of those surveyed, public relations entrepreneurs are largely satisfied with the size of 

their businesses, with many looking toward future growth. Areas of satisfaction included the 

flexibility, independence and freedom to be one’s own boss, having creative control over 

business decisions, being directly rewarded for business successes, and having the ability to run 

their firms as they see fit. Other areas that bring satisfaction included the challenge and variety of 

their client-base and helping their clients succeed. Major accomplishments included starting and 

managing their own successful business, serving major clients, being a good employer, making 

good business decisions, and helping in the community. Motivations for being a public relations 

entrepreneur included a long-time desire to be their own boss, taking advantage of a good

| 158 

business opportunity, and the preference of starting their own firm after being laid off rather than 

finding another employer. Challenges cited were time management, employee management, and 

the financial side of running a business. Work/life balance was also an issue, as 48% of those 

interviewed felt they did not have balance. The vast majority (94%) of respondents indicated 

they would become public relations entrepreneurs all over again, although many would do things 

a little differently. 

While these results were specific to the public relations field, study findings could also be 

useful for those teaching small business entrepreneurship, as many small business owners face 

some of the same issues, regardless of their “product.” Challenges in the areas of human 

resources in particular seem to be fairly consistent across genre, based on the study data paired 

with the literature. Additionally, lack of quality information or assistance regarding business 

partner selection seems to be common theme as well. Also of note should be the similarities in 

motivations for entrepreneurship between public relations entrepreneurs and entrepreneurs in 

general. 

While some of the study results mirror the general entrepreneurial research regarding the 

areas of satisfaction, motivations and challenges, there are some differences to notes as well, 

pointing to some issues that might prove to be more specific to the field of public relations 

entrepreneurship. Particularly in the area of challenges, where the majority of respondents 

pointed to areas of finance (billing, collecting, setting a fee structure, etc.). This data should 

encourage educators to provide opportunities to obtain this knowledge, as well as encourage 

entrepreneurs to seek this information – ideally prior to opening up their businesses.

This glimpse into the world of the public relations entrepreneur could prove to point the 

way for additional research, adding to the body of knowledge and aiding in curriculum 

development. In addition, future public relations entrepreneurs can use the advice and comments 

gleaned from this study to better prepare themselves for starting their own businesses. Through 

analyzing challenges and successes, and learning from mistakes, business owners can better 

serve their clients, become better employers, and achieve greater job satisfaction. 

| 159

References 

| 160 

Cole, D., Panchanadeswaran, S., Daining, C., (2004). Predictors of Job Satisfaction of Licensed 

Social Workers: Perceived Efficacy as a Mediator of the Relationship Between Workload and Job 

Satisfaction. Journal of Social Science Research, 31 (1), 1-12. 

ndCroft, A.C. (2006). Managing a public relations firm for growth and profit (2Ed.). 

Binghamton, NY: The Haworth Press. 

Das, T.K. & Bing-Sheng, T. (1997). Time and entrepreneurial risk behavior. Entrepreneurship: 

Theory and Practice , 22 (2), 69-88. 

DeMartino, R., & Barbato, R. (2003). Differences between women and men MBA entrepreneurs: 

Exploring family flexibility and wealth creation as career motivators. Journal of Business 

Venturing , 18, 815-832. 

Dedhia, N. (1995). Survive business challenges with the total quality management approach. 

Total Quality Management, 3 (6), 265-272. 

Dyer, W.G., Jr. (1994). Toward a theory of entrepreneurial careers. Entrepreneurship: Theory and 

Practice , 19(2), 7-21. 

Ennico, C. (2003, September 1). Finding out whether there is an entrepreneur in you. 

Enterprise/Salt Lake City, pp. 10-11. 

Falconi, T.M. (2006, Nov.). How big is public relations (and why does it matter?): The economic 

impact of our profession . Institute for Public Relations (www.instituteforpr.org). 

Hartog, D. & Belschak, F. (2007). Personal Initiative, commitment and affect at work. Journal of 

Occupational & Organizational Psychology , 80 (4), 601-622. 

Hazleton, V., Rayburn, J.D. & Lynch, A. (2007, March 8). Practice and personal characteristics 

billing income among independent practitioners: Moving toward theory . Paper presented at the 

2007 Public Relations International Conference, Coral Gables, FL. 

Hazelton, V. & Rayburn, J. (2005, March). The independent practitioner of public relations: A 

profile of practice issues and business models . Paper presented at the 2005 International Public 

Relations Research Conference, South Miami, FL. 

Hussain, J., Millman, C., Scott, J., Hannon, P., & Matlay, H. (2007). Ethnic minority graduate 

entrepreneurs in the UK characteristics, motivation and access to finance. Industry & Higher 

Education, 21 (6), 455-463.

Kemelgor, B.H. (1985). A longitudinal analysis of the transition from organization man to 

entrepreneur. Academy of Management Proceedings, 67-70. 

Maslow, A. (1943). A theory of human motivation. Psychological Review, 50(4), 270-396. 

| 161 

Miner, J. B. (1997). The expanded horizon for achieving entrepreneurial success. Organizational 

Dynamics , 25 (3), 54-68. 

Reynolds, R. & Whigham-Desir, M. (1995). Four challenges to growing your business. Black 

Enterprise , 26 (4), 90. 

Skemp-Arlt, K.M. and Toupence, R. (2007). The Administrator’s Role in Employee Motivation. 

Coach & Athletic Director, 76 (7), 28-34. 

Smerek, R. and Peterson, M. (2007). Examining Herzberg’s Theory: Improving Job Satisfaction 

among Non-academic Employees at a University. Research in Higher Education, 48 (2), 229-250. 

Tutuncu, O., and Kozak, M. (2007). An Investigation of Factors Affecting Job Satisfaction. 

International Journal of Hospitality & Tourism Administration, 1 (8), 1-19. 

Woolf, H.B. (Ed.). (1980). Webster’s New Collegiate Dictionary. Springfield, MA: G. & C. 

Merriam Company.

Appendix 

| 162

| 163

Sbaer Uca - Small Business Advancement National Center ...

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?