Motivation of Expansion Plans of Entrepreneurs and Small Business Managers

Abstract

The main purpose of the current study discussed here is to review research on locus of control (LOC) in relation to small business management, and to empirically relate LOC to expansion plans of small business entrepreneurs or managers operating within an adverse economic environment. The importance of LOC stems from the fact that the motivations of the small business person are key internal factors in the management of change (Gibb and Scott 1985). The importance of expansion plans is addressed by Amit, Glosten, and Muller (1990, 1233), who write: Surprisingly little theoretical, quantitative, and rigorous literature focuses on decisions of entrepreneurs to develop their ventures.... This lack of knowledge as to how small businesses are developed, coupled with a survey of 255 small business owners who state that setting goals in areas such as sales growth and profit is a common activity (Naffziger and Kuratko 1992), indicates this is an area in need of study. Another purpose is to determine if entrepreneurs and small business managers differ on LOC. The reasons for selecting LOC are the lack of relevant research on other constructs, coupled with LOC having been adequately investigated to the extent hypotheses can be developed (Levin and Leginsky 1990; Perry, Macarthur, Meredith, and Cunnington 1986). The study of risk-taking was rejected due to failures to distinguish entrepreneurs from the general population or managers (Brockhaus 1980). In addition, from a theoretical viewpoint, risk-taking appears to be less basic to the study of small business persons, particularly entrepreneurs (Gormly 1984). In regard to LOC, a person with an internal LOC believes their behaviors determine outcomes, while a person with an external LOC believes luck and/or powerful others control outcomes relevant to them. LOC has been found, in studies conducted in the United States, Australia, and Great Britain, to differentiate entrepreneurs from the general public and middle/senior managers, as well as to distinguish successful from unsuccessful entrepreneurs (Brockhaus 1980, Cromie and Johns 1983, Gilad 1982). Concerning the current study, Wheatley, Anthony, and Maddox (1991, 57) state that ...internals are more likely to exhibit those entrepreneurial qualities that are necessary to enhance the strategic planning process than are externals. Robinson, Stimpson, Huefner, and Hunt (1991) criticize the study of the personality of entrepreneurs. However, in support of the study of an entrepreneurial personality, Smith and Miner (1983) find entrepreneurs different from top and middle level managers in terms of managerial motivation. Other researchers reach similar conclusions (Hull, Bosley, and Udell 1980; Timmons, Smollen, and Dingee 1985). Personality traits of entrepreneurs are found to be a determinant as to which persons display initiative (Lachman 1982). Low and MacMillan (1988, 155) reviewed the literature and conclude that ...entrepreneurs' personalities do have important influences on the organizations they create.... Likewise, Ibrahim and Goodwin (1986, 47) determined that ...entrepreneurial behavior (as measured by the personality attributes) is perceived as a key success factor in small business. In further review of the research to date, Kent (1984, 9-10) wrote: ...there does appear to be impressive evidence that, psychologically, entrepreneurs are not the same as those who choose management or wage employment. This fact is important if the contention of Buckley, Cote, and Comstock (1990) that personality accounts for 30 percent of the variance in behavior is correct. THEORETICAL BACKGROUND OF LOC An interpretation of research relevant to LOC, entrepreneurs, and the environment comes from Gilad (1982). Gilad theorizes that the influence of LOC on perceptual alertness (i.e., ability to see opportunities in the environment) explains the influence of LOC on entrepreneurs. This postulation is based on an extensive review of psychological research which found that persons who have internal LOC have greater amounts of perceptual alertness. …

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