Enterprise and Small Business Principles

Leadership, entrepreneurship and management of small businesses

David A. Kirby

15.1 Introduction

Before it is possible to consider leadership and the management of small businesses, it is necessary to examine the concept of entrepreneurship and its relationship to the small business. Although the term entrepreneurship is often equated with new venture cre­ation and small business management, and the concepts of the owner-manager and self-employment (Gibb, 1996), it is contested here and elsewhere (Kirby, 2003) that the term is much broader than these concepts would suggest. Not all owner-managers can be regarded as entrepreneurs, nor are all small businesses entrepreneurial. This point has been recognised in the literature by Carland et al. (1984: 358) who have sug­gested that there is a clear distinction between the entrepreneur and the entrepreneurial venture and the small business owner and the small business venture. Indeed, they sug­gest that: ‘An entrepreneur is an individual who establishes and manages a business for the principal purpose of profit and growth. The entrepreneur is characterised prin­cipally by innovative behaviour and will employ strategic management practices in the business. An entrepreneurial venture is one that engages in a least one of Schumpeter’s four categories of behaviour: that is, the principal goals of an entrepreneurial venture are profitability and growth and the business is characterised by innovative strategic practices’ (Carland et al., 1984: 358).

This distinction between small firms and entrepreneurial ventures and the distinc­tion between entrepreneurship, leadership and management is considered further in the work of Bjerke and Hultman (2003). Although they do not distinguish between the entrepreneur and the founder of a small firm, they do suggest that ‘it is safe to state that whether a firm will start to grow or not depends mainly on the entrepreneur. The entrepreneur’s attitude towards growth and his or her appreciation of the impact that successful growth will have on the new firm will be crucially determining factors.’ They then go on to differentiate between the three concepts of management, leadership and entrepreneurship, suggesting that: management is an occupation requiring technical skills to be able to run a business; leadership is a role requiring ‘social skills in order to make other people work’ (op. cit.: 75); and entrepreneurship is the means to drive change requiring mental skills. These distinctions are necessary, they contest, in order to recognise that ‘in different periods of a firm, a different combination of management, leadership and entrepreneurship are needed’. The contention here is that this is not necessarily the case but that there is a distinction between small firms that fail to grow and entrepreneurial ventures that do, and that the entrepreneur who drives these growth organisations will need to be, at all times, not just a good manager, but also a leader.

15.2 Learning objectives

There are four learning objectives in this chapter:

1 To appreciate the inter-relationship between entrepreneurship and leadership in the management of small firms.

2 To recognise the difference between transactional and transformational leaders.

3 To be aware of how owner-managers may be developed as transformational leaders.

4 To recognise the role of entrepreneurial leaders and how they achieve their objectives.

Key concepts

■ leadership ■ entrepreneurship ■ management ■ transactional leadership

■ entrepreneurial leadership ■ small business