Risk Taking Propensity among Entrepreneurs, Small Business Owners and Managers

ABSTRACT This study examined the risk taking propensity of a sample of 114 entrepreneurs, 347 small business owners, and 387 managers using the Risk Scale of the Jackson Personality Inventory. Entrepreneurs displayed a significantly higher risk taking propensity than did small business owners or managers. The difference in scores between small business owners and managers was not statistically significant. The authors concluded that entrepreneurs, whose goals are profit and growth, are more likely to display a greater propensity for risk taking than either small business owners, whose primary goals are family needs oriented, or managers. INTRODUCTION The earliest cited definition of entrepreneur is generally Cantillion who wrote circa 1700 (Carland, Hoy, Boulton & Carland, 1984). Among the characteristics which Cantillion cited was risk bearing (Kilby, 1971). Mill (1848), who was credited with bringing the term 'entrepreneur' into general use (Schumpeter, 1934), also believed that the key difference between entrepreneurs and managers was risk bearing. Risk bearing or risk taking behavior continued to be a major aspect of entrepreneurship until modern times (Carland, et. al., 1984). Brockhaus (1980) cast doubt on the traditional perspective with an empirical study which showed no difference between the risk taking characteristics of entrepreneurs, managers and the general public. The issue is far from settled. What is the reality? Is there no difference in risk taking propensity of entrepreneurs? This paper will present an empirical examination of risk taking propensity employing a large sample of entrepreneurs, small business owners and managers. LITERATURE REVIEW The Brockhaus Contribution In a frequently cited Academy of Management Journal article, Brockhaus (1980) examined the risk taking propensity of entrepreneurs employing the Wallach and Kogan (1959, 1961) Choice Dilemma Questionnaire (CDQ). He defined an entrepreneur as one who was a major owner and manager of a business venture who was not employed elsewhere. He examined three groups of individuals: (1) business owners who had initiated their business ventures within three months prior to the study (N=31); (2) managers who had changed positions in their companies within three months prior to the study (N=31); and, (3) managers who had changed employers within three months prior to the study (N=31). Finally, he compared the scores of the participants to the normative data reported by Kogan and Wallach (1964). Participants were drawn from attendees at management training seminars. Brockhaus (1980) reasoned that using entrepreneurs near the beginning of their ventures would include those that would ultimately fail, therefore eliminating a possible bias resulting from examining only successful entrepreneurs. Pairing the entrepreneurs who had recently started businesses with managers who had also undergone recent changes in their professions ensured that more stable individuals (who might be less risk taking) were not compared to the entrepreneurs. Using Analysis ofVariance, Brockhaus (1980) found no statistical differences in risk taking propensity among the three groups. Using a chi-square test with a . 25 confidence level, he found no difference between the respondents' scores and the normative Kogan-Wallach data. Thus, Brockhaus concluded that the risk taking propensity of entrepreneurs is the same as the general population. Using the Kogan Wallach Choice Dilemma Questionnaire, Masters and Meier (1988) replicated the Brockhaus study. They examined 50 managers and small business owners. The participants in the survey were drawn from a list of small business owners and managers who had attended management development workshops. Masters and Meier (1988) compared the mean scores for all respondents to the CDQ norms, the scores for male and female respondents to each other, and the scores for small business owners to those for managers. …