CHAPTER 2

The
Entrepreneurial
Mind-Set in
Individuals:
Cognition and
Ethics

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Learning Objectives
1. To describe the entrepreneurial mind-set and
entrepreneurial cognition
2. To identify and discuss the most commonly cited
characteristics found in successful entrepreneurs
3. To discuss the “dark side” of entrepreneurship
4. To identify and describe the different types of risk
entrepreneurs face as well as the major causes of
stress for these individuals and the ways they can
handle stress
5. To discuss the ethical dilemmas confronting
entrepreneurs
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Recap

Entrepreneur characteristic
Entrepreneur is a mindset and a process
Types of Entrepreneurs
School of thoughts
• Micro and macro

Economic revolutions

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Phases of Economic Development

Agricultural society Farming

Mass
Industrial society Production

The Knowledge Society Information

The Network Society Connectivity

What is next? Autonomy

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Entrepreneurial Mind-Set
• Entrepreneurial Mind-Set
• Describes the most common characteristics
associated with successful entrepreneurs as well as
the elements associated with the “dark side” of
entrepreneurship.
• Who Are Entrepreneurs?
• Independent individuals, intensely committed and
determined to persevere, who work very hard.
• Confident optimists who strive for integrity.
• They burn with the competitive desire to excel and
use failure as a learning tool.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Entrepreneurial Mind-Set
• Can we understand an entrepreneurial mind-set
exhibits?

Yes, by studying

Entrepreneurial Cognition

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Entrepreneurial Cognition
• Cognition
• Mental functions, processes (thoughts), and states of intelligent
humans—attention, remembering, producing and understanding
language, solving problems, and making decisions.
• Social Cognition Theory
• Posits that knowledge structures (mental models of cognitions)
can be ordered to optimize personal effectiveness within given
situations.
• Entrepreneurial Cognition
• Knowledge structures that people use to make assessments,
judgments, or decisions involving opportunity evaluation, venture
creation, and growth.

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Characteristics Associated with the
Entrepreneurial Mind-Set
• Determination and • Calculated risk taking
perseverance • High energy level
• Drive to achieve • Creativity and
• Opportunity orientation innovativeness
• Initiative and responsibility • Vision
• Persistent problem solving • Passion
• Seeking feedback • Independence
• Internal locus of control • Team building
• Tolerance for ambiguity

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 TABLE 2.1 Characteristics Often Attributed to Entrepreneurs
1. Confidence 14. Flexibility 27. Ability to learn from
2. Perseverance, determination 15. Intelligence mistakes
3. Energy, diligence 16. Orientation to clear goals 28. Sense of power
4. Resourcefulness 17. Positive response to 29. Pleasant personality
5. Ability to take calculated challenges 30. Egotism
risks 18. Independence 31. Courage
6. Dynamism, leadership 19. Responsiveness to 32. Imagination
7. Optimism suggestions and criticism 33. Perceptiveness
8. Need to achieve 20. Time competence, 34. Toleration for ambiguity
9. Versatility; knowledge of efficiency 35. Aggressiveness
product, market, machinery, 21. Ability to make decisions 36. Capacity for enjoyment
technology quickly
37. Efficacy
10. Creativity 22. Responsibility
38. Commitment
11. Ability to influence others 23. Foresight
39. Ability to trust workers
12. Ability to get along well with 24. Accuracy, thoroughness
40. Sensitivity to others
people 25. Cooperativeness
41. Honesty, integrity
13. Initiative 26. Profit orientation
42. Maturity, balance
• Source: John A. Hornaday, “Research about Living Entrepreneurs,” in Encyclopedia of Entrepreneurship, ed. Calvin Kent, Donald Sexton, and Karl Vesper (Englewood
Cliffs, NJ: Prentice Hall, 1982), 26–27. Adapted by permission of Prentice-Hall, Englewood Cliffs, NJ.

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Discussion 1
• Which of these https://padlet.com/z10980/CIT480
characteristics you have and
which one you don’t have?

• How can you develop the

ones you don’t have?

• Scan the QR code

• Put your name in subject
• You have 10 minutes.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Developing the Attributes

• By studying
• Training
• Practicing
• Coming out of your comfort zone
• Network with Entrepreneurs.

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Entrepreneurship Theory
• Entrepreneurs cause entrepreneurship.
• Entrepreneurship is a function of the entrepreneur:

E = f(e)
• Entrepreneurship is characterized as the interaction of
skills related to inner control, planning and goal
setting, risk taking, innovation, reality perception, use
of feedback, decision making, human relations, and
independence.

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Dark Side of Entrepreneurship

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Dark Side of Entrepreneurship
• The Entrepreneur’s Confrontation with Risk
• Financial risk versus profit (return) motive varies in
entrepreneurs’ desire for wealth.
• Career risk—loss of employment security.
• Family and social risk—competing commitments of
work and family.
• Psychic risk—psychological impact of failure on the
well-being of entrepreneurs.

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 FIGURE 2.1 Typology of Entrepreneurial Styles

Source: Thomas Monroy and Robert Folger, “A Typology of Entrepreneurial Styles: Beyond Economic Rationality,” Journal of Private Enterprise 9, no. 2 (1993): 71.

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Stress and the Entrepreneur
• Entrepreneurial Stress
• The extent to which entrepreneurs’ work demands
and expectations exceed their abilities to perform as
venture initiators, they are likely to experience stress.
• Sources of Entrepreneurial Stress
• Loneliness
• Immersion in business
• People problems
• Need to achieve

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Entrepreneur Stress: Type A Personalities

• Chronic and severe sense of time urgency

• Constant involvement in multiple projects subject
to deadlines
• Neglect of all aspects of life except work
• A tendency to take on excessive responsibility,
combined with the feeling that “Only I am
capable of taking care of this matter”
• Explosiveness of speech and a tendency to
speak faster than most people

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Discussion 2
• How to deal with the entrepreneur stress? What
strategies you suggest.
• I will assign you breakout rooms.
• Each group discuss this questions and write your
answers.
• After 10 minutes we will return back to the main
class.
• One member from each group provide their
answers/observation.
• There is no one right answer; you can google it.

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Dealing with Stress

• Ways Entrepreneurs Cope with Stress

• Networking
• Getting away from it all
• Communicating with employees
• Finding satisfaction outside the company
• Delegating
• Exercising rigorously

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Entrepreneurial Ego

• Self-Destructive Characteristics
• Overbearing need for control and power
• Sense of distrust
• Overriding desire for success
• Unrealistic external optimism

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Entrepreneurial Ethics (slide 1 of 4)
• Ethics
• Provides the basic rules or parameters for conducting
any activity in an “acceptable” manner
• Represents a set of principles prescribing a
behavioral code of what is good and right or bad and
wrong
• Defines “situational” moral duty and obligations
• Sources of Ethical Dilemmas
• Pressure from inside and outside interests
• Changes in societal values, mores, and norms

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Ethical Dilemmas

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Ethical Dilemmas

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
FIGURE 2.2 Classifying Decisions Using a Conceptual Framework

Source: Verne E. Henderson, “The Ethical Side of Enterprise,” Sloan Management Review (Spring 1982): 42.

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Entrepreneurial Ethics (slide 2 of 4)

• Ethical rationalizations used to justify

questionable conduct involve believing
that the activity:
• Is not “really” illegal or immoral
• Is in the individual’s or the firm’s best interest
• Will never be found out
• Helps the firm so the firm will overlook it

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Reasons Unethical Behaviors Occur

• Greed
• Distinctions between activities at work and
activities at home
• Lack of a foundation in ethics
• Survival (bottom-line thinking)
• Reliance on others

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Entrepreneurial Ethics (slide 3 of 4)

• Complexity of Ethical Decisions

• Extended consequences
• Multiple alternatives
• Mixed outcomes
• Uncertain ethical consequences
• Personal implications

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Entrepreneurial Ethics (slide 4 of 4)

• Ethical Dilemmas in E-commerce/Digital

Business
• Continuing to obtain consumer trust
• Miss use of data and data protection
• Protecting business’s online reputation
• Avoiding tactics that betray trust
• Continuing to exhibit strong ethical responsibility
• Establishing an ethical strategy

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Establishing a Strategy for an Ethical Venture

• Ethical Codes of Conduct:

• Statements of ethical practices or
guidelines to which an enterprise
adheres.
• Are becoming more prevalent in industry.
• Are more comprehensive in terms of their
coverage.
• Are easier to implement in terms of the
administrative procedures used to enforce them.

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 “Always Do the Right Thing”
• Reasons for management to adhere to a high
moral code:
• It is good business because unethical practices have
a corrosive effect, not only on the firm itself, but on
free markets and free trade which are fundamental to
the survival of the free enterprise system.
• Improving the moral climate of the firm will eventually
win back the public’s confidence in the firm.

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Strategy for Ethical Responsibility

• Establish a strategy for ethical

responsibility that encompasses:
• Ethical consciousness
• Ethical process and structure
• Institutionalization

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
FIGURE 2.4 Ethical Challenges for Corporate Entrepreneurship

Source: Donald F. Kuratko and Michael G. Goldsby, “Corporate Entrepreneurs or Rogue Middle Managers? A Framework for Ethical Corporate Entrepreneurship,” Journal of
Business Ethics 55 (2004): 18.

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Ethical Considerations of
Corporate Entrepreneurs
• Organizational barriers • Promote ethical
that invite unethical employee behaviors by:
behaviors: • Providing flexibility,
• Systems innovation, and support of
• Structures initiative and risk taking
• Policies and • Removing barriers for
procedures entrepreneurial middle
managers
• Culture
• Including an ethical
• Strategic direction
component to corporate
• People training

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Key Terms
• code of conduct • failure
• cognition • family and social risk
• cognitive adaptability • financial risk
• dark side of • stress
entrepreneurship
• entrepreneurial behavior
• entrepreneurial cognition
• entrepreneurial mind-set
• ethics

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Next Class

The Entrepreneurial Mind-Set in Organizations

Read chapter 3

© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.