Leadership in Entrepreneurship

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Leadership and communication are constantly growing together, being intertwined into one another to help develop an organization. To be an effective leader, communication has to be defined in the organization for it to be successful. Gary Yukl defines leadership as, "the process of influencing others to understand and agree about what needs to be done and how to do it, and the process of facilitating individual and collective efforts to accomplish shared objectives".[1] To accomplish shared objectives, communication has to be a transactional process that allows for a constant cycle of information to be sent from source/receiver and vice versa. As leaders continue to send and receive information, building relationships with the followers allows for a bond to be made. Through the bond being made it allows for the followers to share their values, and thoughts for example; this gives them a sense of affiliation because the leader is being concerned about his/her employees. Once an organization is able to define leadership and communication, it can begin to advance to the structure of the organization.

Johann Wolfgang von Goethe says, "Treat people as they were that they ought to be and you may help them to become what they are capable of being." As a leader there are two qualities that you need to focus on in an organization: the structure of the organization and how followers are involved. The type of leadership you want in an organization would be a democratic approach. A democratic leader does not feel threatened when followers make suggestions, but instead accepts the contributions to help improve the overall quality of decision making.[2] Having a democratic system allows for the followers to set goals for the organization, and this creates two way communication that openly flows between the leader and followers. The leader wants to have more interaction with the followers. Through interaction it allows followers to be engaged in the organization, but they also have a higher participation rate. The democratic style of leadership communication is often most effective. Generally the benefits derived from democratic communication far outweigh any potential cost.[3]

Successful Styles to Help Democratic Leadership[edit]

For an organization to be focused on a democratic leadership style, traits, functions and relationships have to be obtained. Before you can classify someone to leadership position, certain qualities have to follow. The common assumptions of leaders are: leaders are born; however, this is not the case. Leaders are developed through different types of training and experience. Through the training and experience, the leader gains different traits to help make the organization functional. Leaders need to be interpersonal, cognitive, and motivational. An interpersonal leader allows for relationships to be built and to communicate messages to their followers. Cognitive leaders are able to problem solve more effective because of their intellectual ability to process information and come up with creative ideas to help eliminate the problem in the organization. Finally having a motivational leader’s gets the organization excited about new tasks and this allows for positive productions to occur. Motivation has been associated with ratings of leadership potential, career achievement, and promotion [4] The three traits will help a leader become successful because others will look up to them, and create a positive organization to work in.

Taking on the functional approach of leadership, leaders have to think about responsibilities that are taken out in the organization. The functional approach looks at the communication behavior of the leaders. Through functional leadership, roles have to be taken for the organization to function properly. The roles help give followers classifications, so they have an idea of what is expected of them. Roles in the functional approach are task related, group building and maintenance, and Individual. These roles allow for task to be accomplished and also to build up the organization through positive reinforcement, but also take away conflict that occurs. The task related role gives followers a sense of direction for an assignment to be completed in the group. Group building and maintenance roles steers the organization for open, supportive and healthy relationships with other followers in the organization. This role also helps to eliminate tension between workers and allows for sides to be heard on different topics that arise. However, in an organization the "me" wants to come out and this creates the individual role in the organization. Even though taking on an individual role can be healthy for the self because it creates autonomy, it also can be detrimental to the organization because it reduces the amount of group effectiveness. Being a functional leader allows for the organization to run like a machine and having all the parts work together to accomplish a common goal.

While in an organization, it is important to focus on traits and functionalities of leaders from within, it is also key to focus of the relational side of leadership. Being relational with leaders/followers allows for relationships to be built. While looking at the two different models (vertical dyad linkage theory and leader–member exchange theory), different perspectives from each side are gained. For an organization to de democratic, the LMX theory supports the claims of it. The influence of VDL model helped get LMX theory to where it is today. Usually the assumption is leaders can only build close relations with trusted assistances due to lack of time and resources. Leaders developing relations usually results in partnerships with certain followers, but leaders have the responsibility to make relations and offer partnerships to all of the followers (Hackman & Johnson, 2009, pg. 94). Making partnerships with all of the followers will increase the performance of the organization as a whole. Once this relation is built a relation trust is built and more information is able to be revealed to the organization leader.

Pittacus said, "The measure of a human is what he/she does with power."As an organization is developed, power has to be expressed to be able to hold the structure of the organization together and has the ability to influence others. As influence takes over, tasks will be accomplished in the organization. The types of power that are expressed, will determine the type of leadership styles, traits, function, and relations used. Since there has been description of democratic leadership throughout; there are two types of power that would fit with democratic leadership: Reward and Referent. Reward power gives followers something to work for and accomplish in the organization. To get followers to work for the reward it needs to have some attractive desires. The desire will create motivation in the followers to work harder to obtain the reward. Using the reward will create discussion in the organization and the positive feedback will have followers work harder. This allows for efficiency and time management to be used because the followers want to be the best of the best. The second type of power that could be used is Referent Power. Referent power is having someone followers look up to that has the ability to influence their behavior. The use of referent power has a high follower task satisfaction and task performance [5] Using referent power shows trust is built with the leader because the leader is relational with the followers. Once leaders build trust followers will help in anyway. This power can be related back to relational leadership because of the idea of relationships being built in the organization. As a close relationship is built with followers, more information is exchanged in a two way flow and it creates an established organization.


Entrepreneurship is the act of being an entrepreneur, or "an owner or manager of a business enterprise who makes money through risk and initiative.".[6] Early 19th century French economist J.B. Say provided a broad definition of entrepreneurship, saying that it "shifts economic resources out of an area of lower and into an area of higher productivity and greater yield." Entrepreneurs create something new, something different; they change or transmute values.[7] Regardless of the firm size, big or small, they can partake in entrepreneurship opportunities.

The opportunity to be an entrepreneur arises with the fulfillment of four criteria. First, there must exist opportunities or situations in which people believe that they can use new means—ends frameworks to recombine resources to generate profit. Second, entrepreneurship requires differences between people. Specifically, the preferential access to or ability to recognize information about opportunities. Third, risk bearing is a necessary part of the entrepreneurial process. Fourth, the entrepreneurial process requires the organization of people and resources.[8]

"The entrepreneur is a factor in microeconomics, and the study of entrepreneurship reaches back to the work of Richard Cantillon and Adam Smith in the late 17th and early 18th centuries, but was largely ignored theoretically until the late 19th and early 20th centuries and empirically until a profound resurgence in business and economics in the last 40 years. In the 20th century, the understanding of entrepreneurship owes much to the work of economist Joseph Schumpeter in the 1930s and other Austrian economists such as Carl Menger, Ludwig von Mises and Friedrich von Hayek. According to Schumpeter, an entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation. Entrepreneurship employs what Schumpeter called "the gale of creative destruction" to replace in whole or in part inferior innovations across markets and industries, simultaneously creating new products including new business models. In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. The supposition that entrepreneurship leads to economic growth is an interpretation of the residual in endogenous growth theory and as such is hotly debated in academic economics. An alternate description posited by Israel Kirzner suggests that the majority of innovations may be much more incremental improvements such as the replacement of paper with plastic in the construction of a drinking straw.".

One of the most famous entrepreneurs, Wayne Huizenga owned and operated many companies. He grew Blockbuster Video, Waste Management, Inc., and AutoNation into successful companies. He is also the former owner of the National Football League's Miami Dolphins, the National Hockey League's Florida Panthers and the Major League Baseball's Miami Marlins.

Some scholars have constructed an operational definition of a more specific subcategory called "Strategic Entrepreneurship." Closely tied with principles of strategic management, this form of entrepreneurship is "concerned about growth, creating value for customers, and subsequently creating wealth for owners".[9]

A 2011 article for the Academy of Management provided a three-step, "Input-Process-Output" model of strategic entrepreneurship. The model’s three steps entail the collection of different resources, the process of orchestrating them in the necessary manner, and the subsequent creation of competitive advantage, value for customers, wealth, and other benefits. Through the proper use of strategic management/leadership techniques and the implementation of risk-bearing entrepreneurial thinking, the strategic entrepreneur is therefore able to align resources to create value and wealth.[10]

Leadership in Entrepreneurship[edit]

Leadership in Entrepreneurship can be defined as "process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task[...]" [11] in "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods".[12] This refers to not only the act of entrepreneurship as managing or starting a business, but how one manages to do so by these social processes, or leadership skills. Entrepreneurship, in itself, can be defined as "the process by which individuals, teams, or organizations identify and pursue entrepreneurial opportunities without being immediately constrained by the resources they currently control.[13] An entrepreneur typically has a mindset that seeks out potential opportunities during uncertain times.[14] This leads us to see that an entrepreneur must have leadership skills or qualities in order to see potential opportunities and act upon them. An entrepreneur, at the core, is a decision maker. Such decisions often affect an organization as a whole, which is representative of their leadership amongst the organization.

According to Fisher (1970), there are four phases of decision making: orientation, conflict, emergence, and reinforcement.[15] As a communicative approach, the orientation stage is where the members involved are becoming acquainted both with themselves as well as the problem at hand. The conflict stage is where the problem is analyzed with several possibilities presented to resolve the problem. Upon discussing these possibilities, the emergence phase becomes known when a decision is made about which solution is to be used. The reinforcement stage is the supportive of the decision.[16] These phases are not without objection from many theorists in the field. Morley and Stephenson (1977) claim that such a staged model of decision making is not so rigid between phases and varies depending upon the types of decisions made.[17]

With the growing global market and increasing technologies throughout all industries, the core of entrepreneurship, the decision making, has become an ongoing process rather than isolated incidents This becomes knowledge management which is "identifying and harnessing intellectual assets" for organizations to "build on past experiences and create new mechanisms for exchanging and creating knowledge"[18] This belief draws upon a leaders past experiences that may prove useful. It is a common mantra for one to learn from their past mistakes, so leaders should take advantage of their failures for their benefit. This is how one may take their experiences as a leader for the use in the core of entrepreneurship- decision making.

Global Leadership and Entrepreneurship[edit]

It is important to note that the majority of scholarly research done on these topics have been from North America.[19] Words like "leadership" and "entrepreneurship" do not always translate well into other cultures and languages. For example, in North America, a leader is often thought to be charismatic, but German culture frowns on such charisma due to the charisma of Adolph Hitler. Other cultures, like some Europeans, view the term leader negatively and perverse, like the French.[20] The participative leadership style that is encouraged in the United States is considered disrespectful in many other parts of the world due to the differences in power distance.[21] Many Asian and Middle Eastern countries do not have "open door" policies and would never informally approach their managers/bosses. For countries like that, an authoritarian approach to management and leadership works best, as is custom.

Despite cultural differences, the successes and failures of entrepreneurs can be traced to how leaders adapt to local conditions.[22] With the increasingly global environment, a successful leader must be able to make these adaptations and have some insight into other cultures. Corporate visions, in response to the environment, are becoming transnational in nature due to the changes an organization must make in order to operate or provide services/goods for other cultures [23]


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  3. ^ Hackman, M. Z., & Johnson, C. E. (2009). Leadership: A communication perspective (5th ed.)
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  5. ^ Hackman, M. Z., & Johnson, C. E. (2009). Leadership: A communication perspective (5th ed.)
  6. ^ http://dictionary.reference.com/browse/entrepreneur
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  10. ^ Hitt, M. A., Ireland, R., Sirmon, D. G., & Trahms, C. A. (2011). Strategic Entrepreneurship: Creating Value for Individuals, Organizations, and Society. Academy Of Management Perspectives, 25(2), 57-75. doi:10.5465/AMP.2011.61020802
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