INTRODUCTION

A new venture is built around the entrepreneur. It reflects the strengths and weaknesses of the founder and what that person chooses to emphasize and decides to ignore.

Thus, one of the central resources of a new firm is the time of the entrepreneur. This paper focuses upon how entrepreneurs choose to allocate their time. A focus upon how entrepreneurs act and what they emphasize is consistent with calls to examine the behavior of entrepreneurs (Gartner, 1988).

 

Prior Research

Previous studies of time allocations of managers have chiefly occurred within the context of established organizations. This work has resulted in systems for classifying managerial activity and has provided insights into the fragmented, event-driven behavior of the typical manager (Mintzberg, 1975; Kurke & Aldrich, 1983). These organizational settings (large, established firms) are often characterized by formal structures and job definitions and considerable differentiation of roles. Little has been done in examining managerial time allocation in the context of new ventures. Such organizations are distinctive in that they have only one or a few managers, so that the entrepreneur represents a large part (sometimes 100%) of the managerial talent available. They are also characterized by little differentiation of job responsibilities, a lack of formal administrative systems, and not much organizational history about how things should be done. Because the margin between success and failure can be thin, every problem demands attention. Within this unstructured, pressure-ridden environment, an owner-manager may engage in direct sales, provide services to customers, train and supervise employees, review financial statements, negotiate with the bank, think about the future of the business, and sweep the floor - all in the same day.

For owner-managers, the new venture setting is also distinctive in that they have no superiors to tell them what to do. They may be pressured by circumstances, but, to a considerable degree, they can define their own jobs. Thus, we might expect entrepreneurs to allocate their time differently, depending upon their backgrounds and primary interests. These possible relationships have not been examined previously. If there are systematic relationships between background, primary goals, and behavior, this may have important implications for entrepreneurs and their advisors. Some entrepreneurs may tend to behave in particular ways because of their backgrounds and goals, even though it may not be in the interests of their ventures.

There has been surprisingly little attention devoted to how entrepreneurs spend their time. In a conceptual paper, Bird noted that "Entrepreneurs’ functions are a mix of operations, management, promotion, and leadership activities" and that "the hierarchical position of the entrepreneur is less well established than that of traditional executives" (Bird, 1988,p.446). She also observed that "Entrepreneurs want to be ‘where the action is,’ doing it, in contrast to managers with a ‘bias for action,’ who help others to do it" (p.449). She noted contrasts across entrepreneurs. "Process-oriented entrepreneurs’ choose self-employment...as a means to achieve satisfying work and a comfortable life...In contrast, ‘opportunistic-entrepreneurs’ become entrepreneurs in order to build an organization which they can lead" (p.448). Both kinds must "move between operations (where details are important) and strategy (where the ‘big picture’/vision is important)" (p.448). We thus see that entrepreneurs may have considerable flexibility about how to define their organizational roles. However, they feel impelled not only to be deeply involved, but also to be able to move back and forth between pressing immediate problems and strategic direction and leadership. Although Bird talks about entrepreneurs with different goals, she does not speculate about how time allocation patterns may vary accordingly.

Two published empirical studies have looked at how entrepreneurs spend their time. McCarthy and her co-authors examined differences in how entrepreneurs change their time allocation patterns as firms move from one stage of development to another (McCarthy, et al., 1990). They explicitly considered the effects of moving to a stage in which the entrepreneur had to manage through others, either through having added multiple locations or through having hired supervisors. Using a longitudinal sample of 258 retail firms, they found that entrepreneurs in later stage firms devoted more time to employees, less to customers, more to financing, and more to planning. They concluded that the "behavior of the entrepreneur changes as the firm moves through the early stages of development" (p.15). This suggests that time allocation patterns vary systematically with organizational settings. However, it does not address explicitly whether entrepreneurs with different goals behave differently or whether time allocation is related to venture performance.

Van de Ven and his associates examined 12 educational-software companies, examining factors influencing successful startup (Van de Ven,1984). They considered ways in which the six more successful firms differed from the six less successful ones. In considering how the principal founder allocated time, they found some indication that the less successful ventures had founders who spent more time contacting existing and potential customers and less time on internal activities. However, the differences were not statistically significant (p=.12), possibly due to the small sample sizes. It may also be that founders of less successful ventures simply felt they had to spend more time developing sales. This study provides evidence that founders do vary in their time allocation patterns. It also suggests that there may be relationships between how they spend their time and venture performance.

 

Theoretical Framework

This paper is concerned with entrepreneurs’ time allocation and how differences in individual backgrounds influence that behavior. It is also concerned with whether time allocation influences venture performance.

The theoretical basis for the argument that the background of the entrepreneur determines his or her choice of types of behavior is based on well established research traditions in vocational psychology. The most widely cited of these is the theory proposed by Holland (1973, 1985) who described six distinct personality types, and described their preferences regarding occupational choices as well as behaviors. These six types labeled Realistic, Investigative, Artistic, Social, Enterprising, and Conventional are represented as points on a hexagon. The position on the hexagon defines the relative similarities and compatibilities among the personality types. This schema also describes opposite types (those that are across from each other on the hexagon). For the purposes of this paper we will focus on two of the opposite personality types described by Holland, the Investigative and Enterprising types. Holland (1985) describes the investigative types as preferring activities "that entail the observational, symbolic, systematic and creative investigation of physical, biological and cultural phenomena in order to understand and control such phenomena" (pp.19-20). The investigative type is attracted to problem solving, to scientific and technical activities and has an aversion to social and interpersonal activities. The enterprising type has a preference for "activities that entail the manipulation of others to attain organizational goals or economic gain" (p. 20). The enterprising type tends to be social, persuasive, interpersonally competent and values economic achievement. The theory notes that because they are opposite types their preferences and aversions regarding behavior are exactly opposite.

Although Holland’s theory of vocational choice argues that personality types will seek career choices that are consistent with the type, it is likely that both types of personalities may choose to establish an entrepreneurial organization. However, according to this theory we would expect the organizations led by investigative types to be systematically different from the organizations led by enterprising types. Specifically, we would expect differences in the philosophy or goals of the owners, in the behaviors or activities they allocate more time to, and in the economic success of the organization.

In the management literature it has been widely recognized that entrepreneurs vary in their primary goals. Goals have been one of the major variables considered in forming typologies of entrepreneurs (Filley & Aldag, 1978; Smith & Miner, 1983; Woo, Cooper & Dunkelberg, 1991). In what seems to be an interesting parallel to the Holland classification, Filley and Aldag (1978) describe entrepreneurs in terms of a "craftsman" type and an "administrative" type. According to Filley and Aldag a craftsman entrepreneur prefers technical work and has a primary motivation of "making a comfortable living," while the administrative type prefers management tasks utilizing "forecasting, planning, budgetary controls ..." and is motivated by "making a lot of money." These characterizations are consistent with the predictions based on the Holland model of vocational choice.

Research by Bird (1988) on the behavior of entrepreneurs characterized entrepreneurs as either process-oriented or ends-oriented. According to Bird, process-oriented entrepreneurs "choose self-employment as a means of achieving satisfying work and a comfortable life." She further describes process-oriented entrepreneurs as "craftsman-entrepreneurs" who "begin ventures in order to use their technical skills" (p. 448) and are driven by a need for personal autonomy. In contrast, ends-oriented or "opportunistic entrepreneurs" are more likely to be motivated by financial gains and the opportunity to build and lead successful organizations. Other types have also sometimes been identified, including "promoters" (Filley & Aldag, 1978) and "family entrepreneurs" (Lafuente and Salas 1989). However, the two types most often found in the literature have been "craftsmen" and "opportunistic" entrepreneurs, with the former emphasizing non-economic goals primarily and the latter economic goals.

The preceding discussion shows the parallel development of two distinct types of leaders of entrepreneurial organizations in Holland’s work in vocational psychology (investigative versus enterprising types), in Filley and Aldag’s research on general management (craftsman versus administrative) and in the work of Bird who focuses on the entrepreneurial organization (process versus ends-oriented, or craftsman versus opportunistic). For the purposes of this study we will utilize the nomenclature developed by Filley and Aldag and characterize the leaders as craftsman-entrepreneurs versus administrative-entrepreneurs. We will also adopt their operational definition and classify the types of entrepreneur according to their primary goals.

The relationship between the type of entrepreneur and the activities he would be most likely to engage in results directly from each of the streams of research discussed above. Holland’s work indicates that the enterprising type is much more likely to engage in managerial activities which involve more social and interpersonal activities such as planning, developing human resources, and generally managing the business. On the other hand investigative types are more likely to be isolated from the social and interpersonal activities and focus on the scientific and technical aspects of the business. According to Filley and Aldag, craftsmen-entrepreneurs are primarily concerned with lifestyle; we might expect their behavior to emphasize activities which appeal to them. The business is the vehicle to achieve their goals, which are often non-economic in nature. Administrative activity may be less appealing and may have lower priority. Therefore, we would expect the following:

H1: Craftsmen-entrepreneurs will devote relatively less time to administrative activities.

Although typologies based upon primary goals have often been developed, little has been done to investigate the antecedents of those goals. One factor expected to influence primary goals is the professional or vocational experience of the entrepreneur. This experience would provide the base of knowledge and skills upon which the founder can draw. It would affect what the entrepreneur perceives that he or she can do best. Those who have developed technical or selling skills may feel that this is something they can do well, in fact something they could build a business around. Those with managerial experience may be more comfortable with managerial activities, as well as having a richer understanding of what managerial work entails. The work of Holland (1985) would also suggest that enterprising types are more likely than investigative types to have previously sought managerial positions and to have developed an experience base that is compatible with their personality. We would therefore expect that prior choices of work environments would be a good predictor of future choices. Thus, both primary goals and time allocation patterns are likely to be related to the previous experience of the entrepreneur.

H2: Entrepreneurs with previous managerial experience will be less likely to pursue the goals of craftsmen-entrepreneurs.

H3: Entrepreneurs with previous managerial experience will devote relatively more time to administrative activities.

In considering influences upon entrepreneurial time allocation, it is important to control for firm size. Size of firm will undoubtedly affect time allocation, in that larger firms have more employees to supervise. In addition, there will be more differentiation of roles, with the founder freed from some activities which are delegated to employees. Initial size of firm is also likely to be related to the primary goals of the entrepreneur, with craftsmen entrepreneurs being more likely to start firms which stay small (Cooper, Woo, & Dunkelberg, 1991). Therefore, initial size of firm is included as a control variable.

The hypothesized relationships describing expected influences upon entrepreneurial time allocation are described in the path diagram in Figure 1.

FIGURE 1
Path Analyses - Hypothesized Paths

(Not Available)

In what ways might we expect time allocation patterns to influence venture performance? Presumably, all of the things which a founder does are important, including waiting on customers, supplying products or services, and even sweeping the floor. However, entrepreneurs who devote more time to administrative activities, including supervision of employees, securing financing, and planning, should do a better job of dealing with these critical functions. They can hire and train employees who deal with customers or who provide the goods or services the firm supplies. By contrast, those entrepreneurs who devote less time to administration (and devote relatively more time to the "doing" activities of dealing with customers, etc.) may do less well in the critical administrative functions needed to build their businesses.

H4: Firms whose entrepreneurs devote relatively more time to administrative activities will show better performance.

Of course, all of the variables considered, including managerial background, primary goals of the entrepreneur, and initial firm size, might be expected to influence firm performance also. Considerable prior research shows that founders with managerial experience are more likely to be successful in regard to firm growth and financial performance (Cooper & Gimeno, 1992). Those who emphasize administrative goals are more likely to have firms which grow and change (Filley & Aldag, 1978). Firms which are larger at start-up avoid some of the liabilities of small size and are more likely to survive (Aldrich & Auster, 1986; Cooper, et al., 1994).

The hypothesized relationship of time utilization and performance is also shown in the path diagram in Figure 1.

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Last Updated 1/15/97 by Geoff Goldman & Dennis Valencia

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