Leadership and Successful Entrepreneurship
In essence, operating a business requires the capacity to navigate through a wide array of potential risks. For organizations to survive there must be quick response and management of dynamisms of innovations and environments. Primarily, a leader refers to a person that people follow or one who organizes and directs people towards the achievement of common goals. Most leaders consider themselves as entrepreneurs irrespective of their contribution towards the foundation of the company.
Leaders in business are those individuals who are particularly successful in decision-making about the direction of the venture, and they have the necessary skills. The world over the last thirty years has witnessed the emergence of most influential entrepreneurial activity. According to Kuratko, the primary drive of most entrepreneurs is to change the world of business by challenging the unknown and continuous creation of future success of their business (2004). The aim of this paper is to critically discuss implications of leadership to successful entrepreneurship and its contribution to the recognition of business opportunities that future trends of the 21st century can exploit.
Leadership and Leadership Styles
Businesses that are thriving in environments with technology, social, and political changes are both uncertain and unpredictable. As a result, business firms find themselves in situations requiring adaptations. In such environments, businesses require real leadership to take them through the changes that are likely to complicate their performances.
Leadership has been defined using different theories and models. In a general sense, leadership is the act of executing leading roles while leadership style entails exercising the leadership in a particular way. According to Bass (1990), leadership can be transactional or transformational. He argued that transformational leadership can largely be based on charisma, personality consideration, as well as intellectual stimulation. In contrast, transactional leadership involves the execution of management and future reward for success.
The use of entrepreneurship and leadership interchangeably results in a more integrated perspective of leadership as entrepreneurial leadership. According to Prabhu, entrepreneur leadership entails performing in entrepreneurial undertakings depending on the visions of the entrepreneurs (1999). It involves identifying profitable opportunities that others have failed to identify in a creative, innovative, and risk-taking manner.
There are differences in characters between entrepreneurial leaders and the ordinary managers. Entrepreneurial leaders lead people by motivating and directing them, as well as setting up visions for the organizations. Thus, entrepreneurial leadership involves personal characters, opportunities creation and setting objectives (Nicholson, 1998). In competitive environments with complexities and uncertainties, a type of entrepreneurial leadership is engaged since it is different from the behavioral types of leadership. This entrepreneurial leadership is capable of adapting to the high velocity of dynamic environments and sustaining innovations (Surie et al., 2007). Therefore, entrepreneurial leaders ought to be highly innovative and committed to the creation of value in the markets.
Entrepreneurial leadership has many connections with leadership styles. According to collectivistic leadership theories, entrepreneurial leadership is more transformational. Also, it is value based and team oriented style of leadership because it stimulates creativity (Gupta et al. 2004). Additionally, entrepreneurial leaders are highly competent, and they encourage their employees to behave in the same way.
Leadership Styles
There are two primary leadership styles that most entrepreneurs use to manage their businesses. These are transformational and transactional leadership styles. Business managers are responsible for the outcomes of the businesses and, therefore, they ensure good relationship and cooperation with their subordinates. Also, they make use of effective leadership styles that will optimize their objectives.
Transformational leadership style
For firms to maintain the success, they must transform their practices, and this means that they need to modify and increase their strategies. Additionally, a significant transformation of enterprises is essential for them to reinvent. The entrepreneurial orientation usually indicates the organizational level of entrepreneurship (Thornberry, 2006).
Leadership entails influencing people to behave in a certain desirable way (Northouse, 2007). Leadership and entrepreneurship are important in the study to explore how they interact to influence business environments. Primarily, transformational leadership entails approaches that change the individuals and social settings of an organization; it results in valuable and optimistic changes in the minds of both leaders and their subordinates. By inculcating these changes, leaders aim at developing more leaders from their followers. According to Bass, transformational leaders are those people who raise the conscious level of their followers about the importance of the outcomes and the methods they can use to reach those outcomes (1990).
Transformational leadership is the most efficient leadership style that most entrepreneurs use. It is found particularly useful in small enterprises which dominate greater parts of economies almost in all countries. Research conducted to evaluate the effectiveness of transformational leadership showed that quality leadership is vital for implementation and growth of entrepreneurship in any country (Thornberry, 2006). It also revealed that leaders who use transformational approach are more successful in effecting changes in business organizations.
Transactional leadership style
Entrepreneurial leadership entails developing and communicating the set goals as well as engaging the team members in identification, development, and taking opportunities to leap the best advantage. Transactional leadership entails rewarding of the performance of the subordinates for their compliance (Bass, 1990). Unlike transformational style, entrepreneurial leadership that applies transactional style does not look into the future change. Instead, it works toward maintaining the initial status of business. Additionally, leadership that uses transactional style motivates workers by giving promises and rewards while taking disciplinary actions to correct them. It encourages people to commit themselves to their work through the use of strategies such as goal setting, responsibilities, and planning.
Transactional entrepreneurial leadership focuses on short-term targets and does not look at creativity and generation of new ideas. Leaders use strategies that look at basic management functions, organization, and control of their plans. They believe that the best management system is the one that rewards and punishes workers to keep them in the course (Bass, 1985).
Comparison between transformational and transactional leadership styles
Transactional leadership focuses on basic processes rather than prospects. Leaders look at the compliance of workers and reward or reprimand them accordingly. In contrast, transformational leaders look into the future and set plans and goals to be achieved. Besides, in transactional leadership, the aim of management is to maintain the status rather than improving. On the other hand, transformational leadership entails individualized concern, and it promotes creativity and new ideas for solving problems. Moreover, transactional leadership employees realize the set plans through rewards and punishments by the leaders. On the other hand, transformational leadership motivates workers through high deals and ethical values. The two leadership styles have one major similarity in that both of them are essential in describing the type of leadership.
Entrepreneur and Entrepreneurship
Wealth creation in a country such as England and Scotland is highly dependent on the competitiveness of businesses established in it. An entrepreneur is a person who identifies a business opportunity and takes the relevant initiatives to exploit that opportunity (Fernandes and Contributor, n.d). He possesses high aptitude and characteristics that are rare in the ordinary people. The capacities of entrepreneurs to create competitive environments in a country rely on the management skills of the entrepreneurs.
Entrepreneurship entails a dynamic process that requires the devotion of passion and energy towards change, creation, and accomplishment of ideas, views, and solutions. It involves the readiness to take the risk on career and time, and this entails the capacity to develop an effective team in a venture and skills to marshal the resources (Borch, House$ Smith, 1999).
Besides, the entrepreneurial abilities to build a strong business plan as well asformulate vision to identify opportunities where others fail to see is essential. An entrepreneur identifies a profitable opportunity and takes the necessary initiative to venture into it. A simple theoretical model shows that entrepreneurs lead to entrepreneurship. Thus, entrepreneurship is related to entrepreneur, and clear examination of the relationship between them helps in the understanding of the evolution and development of entrepreneurship (Lichtenstein, et al., 2006).
Entrepreneurial decisions and their impacts on business growth
Entrepreneurial decision making is critical because it helps entrepreneurs to reduce risks of loss and to maximize profits. They make decisions on whether to enter into a market, utilize an opportunity, and to make a re-investment. It also helps them in changing tactics to fight competition and making a decision about termination or continuity of their venture.
In the modern market economy, small and medium size businesses play a significant role in the markets; they are fundamental for efficiency and prosperity of the state. Therefore, the strategic entrepreneurial decisions should be viewed as the major driving force for the economy. Thus, understanding the decisions of the entrepreneurs helps in building knowledge of the forces that motivate companies to play a part in the business environment of any country. Also, an analysis of the strategic behavior of the entrepreneurs and a closer inquiry on how their reasoning influence performance will also influence the policy makers to create an enabling environment that will support thriving of businesses.
According to Neoclassical theory, entrepreneurs make rational decisions to venture into businesses by considering all possible outcomes from any venture. They look at any anticipated risk that can affect performance and operations of their businesses, the future trends in growth, competitiveness, and stability a business environment before making optimal decisions to start and operate a business (Goossen and Stevens, 2013).
Outcomes of leadership on success of entrepreneurship
Entrepreneurial development is essential for change in a country’s economic behavior (Wright and Marlow, 2012). Entrepreneurial development contributes to economic development in many countries. The success of entrepreneurship depends on many factors that include business environment, economic growth, and political stability of a country and leadership. Understanding how entrepreneurial leadership behaves ensure that there is the development of small and medium enterprise businesses in a country (Cogliser and Brigham, 2004; Bryant, 2004). Entrepreneurship will not thrive well in the absence of efficient leadership. According to Bass (1990), leadership is a worldwide phenomenon, and the universality in the transformational-transactional models of leadership is evident in many business organizations. Good leadership enhances the performance of an organization, and in many countries, quality leadership is lacking, resulting in poor performance of many enterprises.
Most of the successful entrepreneurs are those who were leaders at the beginning. They like sharing their visions and those of the firms with people so that they can challenge him if they fail to realize them. Leaders should, therefore, write down the vision of their business and put persistent efforts towards realizing them. For successful entrepreneurship, the realization of the set targets should be a collective responsibility for all stakeholders in an enterprise. Successful entrepreneurial leaders set the goal for the business and then split it down to the subordinates as assignments (Ries, 2011). Thus, they ensure that each person works toward individual targets but collectively they make up the vision for the business.
Leadership style is essential in determining the future of entrepreneurship in a country Valdiserri and Wilson (2010). Leaders should build up a better perception of leadership behaviors to enhance achievement of their goals and plans.
Research conducted in Malaysia showed that leadership is a factor as far as entrepreneurship is concerned (Abdul, et al., 2008). Also, entrepreneurs are more inclined to transformational than to transactional leadership style. From this research, it is clear that entrepreneurial leadership is a major factor that hinders the success of entrepreneurship in a country. Poor quality leadership, lack of employees’ motivation, insufficient managerial skills and lack of innovativeness and creativity are some causes of failure of entrepreneurship in most countries (Greenberg, McKone-Sweet, and Wilson, 2011). Therefore, right leadership behaviors are essential for energy channeling and employees motivation towards the desired direction.
Effects of leadership on business environment
Business environment entails aspects that are either external or internal to the organization, and they influence the operations of that business. Leadership is one of the factor the significantly influence the outcomes of the business activities. Poor quality leadership has demoralizing effects on the workers. Thus, they lack the inner willingness and morale to work hard, resulting in poor coordination activities and consequently failure in performance.
Lack of strategic leadership qualities results in failure of the leaders to set goals that would enable employees to work hard under minimal supervision. Thus, they lack the time to concentrate on other important issues as most of their time is spent supervising (Barringer et al., 2015). The performance of the enterprise is thus compromised, leading to low-quality goods and services. Besides, poor leaders adopt strategies that are weak and flawed. Consequently, the plans of business are not met consistently, and they end up closing.
Contributions of leadership to the recognition of business opportunities that can be exploited by the likely future trends in the 21st century
Good leadership is one that is capable of being reflected in the current time of business existence and future. The strategies that leaders adopt affect the likelihood of future operations of the same business or even similar. The strategy provides a chain of recommendations to close the difference between the current state of affairs and the future desired by the enterprise owners. From the current leadership strategy, a development plan can be formulated to generate the future status desired, and the inferences for capacity management procedures can be identified.
Formulation of leadership strategy requires first the analysis of the current leadership to determine its faults and to rectify them in the new policies. The process begins by identifying the strengths and weaknesses as well as the opportunities that are in the markets that that have an impact in the future. This analysis would help in the formulation of a unique business enterprise with tradeoffs between the current and the expected future ventures (Matthews, 1996).
With good leadership strategies, the plans for future investments would be made by considering the unexploited natural as well as human resources (Kim, 2014). Additionally, the success of the current business enterprises motivates people. Also, it will heighten their willingness to venture in small and medium enterprises.
Good leadership will help in identifying the key drivers to investment and making choices. People base their decisions to invest on what they can see with the current businesses. If there is poor leadership, the potential for enterprise development remains hidden because entrepreneurs have little willingness to take risks. Therefore, entrepreneurial leadership should motivate potential entrepreneurs by showing off their success and minimizing chances of failure (Canals, 2015).
The current trend in enterprise growth should be consistently positive if we should expect high levels of entrepreneurship in the 21st century. To realize such trend, the current leaders in small and medium enterprises should set realistic and achievable vision whose realization would make more people to want to invest. Therefore, leaders should commit themselves to ensuring that recognition of business opportunities is unveiled and can be exploited in the future
Impacts of entrepreneurship on economic growth
There has been remarkable growth in wealth in the last two decades over the world. Numerous studies involving the analysis of entrepreneurial activities have shown that economic performance can be expressed in terms of levels of entrepreneurship in a country. Literature has shown that economic performance at firm level can be measured by analyzing the impact of entrepreneurship on the economy at that level.
Entrepreneurial growth has a direct impact on the economy. Entrepreneurship leads to innovations that in turn increase division of labor and markets growth. According to many development scholars, entrepreneurship is the major driving power for the growth of economies of developing countries. To clearly understand the role of entrepreneurship in economic development, it is important to examine the relationship between the entrepreneurship and the individual components of the economy.
According to Anne (2014), entrepreneurship links production and other agents involved in the production. She described entrepreneur as a person who facilitates the establishment of market equilibrium by identifying opportunities and investing to clear deficiencies in the markets. From the behavioral definition, an entrepreneur is the one who manage the production by taking the risks involved in the production and paying wages to the worker. Thus, by initiating production, entrepreneurs contribute to the country’s GDP. Furthermore, entrepreneurs constitute the largest part of taxpayers in any an economy. Taxes are the major source of revenue that government uses to fund major development projects.
Conclusion
It is undeniable that good leadership is vital for entrepreneurial development, growth, and performance. The role of leadership in any business is to ensure a well-coordinated functioning of that business. Due to their transformational abilities, entrepreneurs have been described as crucial players that facilitate changes in the business world. Quality leadership in the small and medium businesses is the central pillar of their success. Indeed, the most successful enterprises in the world are anchored in good leadership. This operation determines business success; as such leaders must ensure that businesses are operating in the most conducive environments to enhance the realization of their visions in the 21st century. There is an increasing trend in entrepreneurship with possibilities of growing further if there is a consistent success of entrepreneurs. Therefore, leaders must ensure that consistency is maintained as this will encourage more people to invest in small and medium enterprises.
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