Italian Entrepreneurs: a Surprise Result

by Guido Prato Previde & M. J. Kirton

Background and basic hypotheses

Entrepreneurship is a research subject of great interest.  Many studies have been published focusing on different facets, either of the concept itself (Casson, 1982; Chaganti & Chaganti, 1983; Cohen, 1989; Cunningham & Lischeron, 1991), on the entrepreneur’s characteristics (Drucker, 1985; Leavitt, 1986) or such topics as “promoting new combinations” (Schumpeter, 1934; 1939; 1950).

The outcome of these studies has also been varied and uncertain, and there still exists disagreement and confusion about the role and characteristics of the entrepreneur (Cheah Hock Beng, 1994; Johanisson & Senneseth, 1990).  Most of the studies have stressed the concept of innovation as one of the fundamental and underlying qualities related both to the person and to the business process.  The studies generally agree in attributing to the entrepreneur a unique ability to solve problems related with the management of change, to take consequent initiative within uncertainty, and to take risks, (Tandon, 1987; Buttner & Gryskiewicz, 1993).   However, not all accept this general inclination toward innovation as the entrepreneur has also been described (Hayek, 1945, 1949; Kirtzner, 1973,1979) as adjusting to rather than just disturbing the current environment.

The general view that entrepreneurs take risks is based on the assumption that it is safer to stay in a larger established organisation, rather than set off with less protecting structures, likely to be under-resourced and having to be skilful in all parts of the business.  This is a general view of entrepreneurial activity, yet in many countries there is more of a culture to set up a small business, in traditional setting, supported by the family, one of whom will later expect to inherit it.  This is typical in Italy , for instance, (Coda, 1989; Corno, 1989a; 1989b).  In this setting, perhaps only the founder may be innovative in the sense of the American and British cultures from where most of the literature emerges.

Using KAI, Tandon tested the prime hypotheses, in the US context, that the entrepreneur is an innovator.  His finding is that the relatively high innovators (on or more than one standard deviation above the general population norm) made up only half of his sample, drawn from those assisted by a venture capital company.  However, both Tandon and Buttner & Gryskiewicz found one important additional finding – that it was the more adaptive (the half that includes also mild innovators) who tended to survive in the business.  The latter study showed that with each year the business survived the more adaptive was the mean of the founders. Since A-I theory has support for its contention that style preference does not change with age, then these findings suggest that more innovators set up entrepreneurial businesses but more of the more adaptive among them actually survive.  Possibly more high innovators tend to fail than do the more adaptive.  Possibly more innovator entrepreneurs tend to sell out as successes looking for new fields of conquest or because they are on the verge of failure – a condition imposed by venture capital firms.

There are two hypotheses to test with an Italian sample of owners of entrepreneurial businesses.  First, are the founders wholly or predominantly innovative?  Second, is there any significant style difference between founders and followers?  This pilot study is small (N=60) and geographically limited (an industrial area in North of Italy), made up of about half entrepreneurs who started their business and the rest “received their business through the family”.  A-I theory and measure was selected for use in this study because of being based on clear definition and subject to much test in the literature. It is also largely culture free (Kirton, 1978; Prato Previde, 1991; Tullett & Kirton, 1995).  The Italian validation of the KAI (Prato Previde, 1984) involved a large (over 800) general population sample that contained a very small group of entrepreneurs among the managerial sub-set.

The Sample

All live and operate in the area surrounding the city of Lecco, said to be one of the most active and brilliant initiating centres in the region of Lombardia and one of the wealthiest in the whole of Italy (Corno, 1989c).

Most of the sample has been selected from the membership of the Association of the Local Entrepreneurs of Lecco. They are successful, relatively small, all the present owners are actively managing their firm and their business which have, on average, survived longer than the 2 years (the “survival phase” in Tandon, 1987).  In fact the mean survival time is over 10 years.  From among the list provided by the local Associations of Lecco (Corti, 1993) a sample of eighty people was randomly selected.  All these candidates were called by telephone and asked to take part in the program.  A formal letter from the main association was addressed to them, letting them know the aim of the research and asking them to support the research.  The final sample seems representative of the list.

Of the original 80, forty were the initiators of the enterprise, while the remaining 40 people represent the next generation of the previous sub-group, or the second generation of similar industries.  It was not possible to include only persons (initiators and followers) who were part of the same family.  But all the people included, who were randomly picked, are part of a similar cultural, geographical and entrepreneurial domain.  Among the original number of 80 people selected, about 75% of them accepted (N=60); with 57.5% of the founder sub-group accepting and 92.5% of the follower sub-group.  Men dominate the sample.  The number of the women in the sample totals nine, and all of them are in the sub-set of followers.  But this is typical for this cultural environment, and reflects the membership of the Association, which has 7% women.

The Method

All the sample were met personally by a researcher for about 40 minutes; during that time they were made generally aware of the concept of the research and then they immediately filled in KAI, followed by a structured interview aimed at collecting some biographical data and some information about the history of the entrepreneur.  Then they were given a second measure (Corti; unpublished 1993) eliciting opinions and descriptions about the company and work experience in managing change. This measure was composed of 14 questions for the initiators, and 13 questions for the followers.

Results and Comments

For the entire sample of these entrepreneurs (both initiators and followers) the KAI mean (95.80; s.d., 15.8) which is the same as for the general population and close, but slightly more adaptive than, for managers generally (Italian managers: 99; Prato Previde, 1984).  The three sub-scales show no surprises.

Table 1:

RESULTS: Founders and Followers  (N= 60)

MEAN: KAI  =  95.80       RANGE = 55 – 132      (SD)  = 15.77

S.O. =  43.98                    =  24 – 61                  =  8.94

E     =  17.08                    =    7 – 34                  =  5.81

R     =  34.73                    =  16 – 50                  =  6.89

So, in brief, the mean is not innovative and the standard deviation not narrow – so we are not dealing with a narrow range of innovators that fits the general literature view.   Although these data were not gathered from the whole Italian entrepreneurial population, this result is both surprising and challenging. Of course, these results have to be tested on other different samples, in order to understand if this first conclusion can be extended safely to the entrepreneurial sector of Italy .  The second question this study addressed is: are the “founders” and the “followers” alike in cognitive style? Tables 2 and 3 below show the results of this division.

Table 2:

  RESULTS:  Founders   (N=23)

 

MEAN: KAI  =  95.26        RANGE = 55 – 132       (SD) =  17.45

S.O. =  45.43                     = 30 – 61                  =    8.71

E    =   16.08                     =   7 – 30                  =    6.36

R    =   33.73                    = 16 – 50                   =    8.64

 

Table 3: 

RESULTS:  Followers   (N= 37)

           MEAN: KAI  =   96.13         RANGE = 64 – 127       (SD) = 14.88

S.O. =   43.08                       =  24 – 58                =   9.08

E     =   17.70                       =    8 – 34                =   5.44

R     =   35.35                       =  24 – 45                =   5.59

 

 

Just small differences, and none significant!  Although, again, further studies are needed to check this finding with different and larger samples and in areas in which small entrepreneurial enterprise is less the norm.

A-I theory does not expect that initiators are more innovative, as does the creative literature.  The difference is in what manner (under what conditions) people initiate.  This is the same argument that all people are creative, all like novelty, all are potentially initiators, but either within, across or outside the prevailing paradigm. In brief, our creativity can be measured by “how much” and “in what way”.  The creativity literature is unanimous in agreeing that those who “pioneer” are more innovative and those who follow, less so.  This research underlines that, again, it is the context that determines style.  We are all faced with the paradox of structure. We need structure in order to enable; but all structure is limiting.  A-I theory argues that it is our characteristic way of how we manage this paradox that determines cognitive style not, as the creativity literature assumes, that one is deemed more innovative simply by the less structure one accepts.  A-I argues that structure is always needed: without structure there is no understanding of the world, there can be no thought process.

The view of the sample

These views were obtained from interviews and Corti’s measure.  The first interesting result from it is that the sample perceived itself quite “innovative”.  On a scale from 1 (least) to 5 (most), the initiators score 4.04 and followers 3.36.  When requested by another item (1 to 5) if they prefer gradual and incremental change (1) or sudden and radical change (5), the mean was 2.5 (2.52: founders; 2.45: followers).  This is mildly on the side of preferring their “novelty” to occur gradually which is closer to “continuous improvement” rather than revolution.  This finding is in complete accord with the mean of their KAI scores and with literature concerning alternative modes of entrepreneurship (Cheah Hock Beng, 1993; Mazzola & Visconti, 1991).  Moreover, when asked to define innovation, only a very small number of them did so in A-I terms.  Conversely, the few who thought the term is related to “revolutionary events” were not the innovators of the sample.  Most defined it as technology resource investigating, incremental changes, corrections and adaptation to products and organisation.

More specifically, in answer to another question (# 6) about which kind of innovation they introduced in their company from the time they were in their position of top responsibility, all listed “improvements”, which is not far from the definition of “innovation” defined as basic in the entrepreneurial field by Manimala, 1993).  As we all know, there are problems with the creativity terminology, equating “new” and “novel” with innovation only (e.g., Foxall, 1994; Kirton, 2003).

Conclusions

The main conclusions of this study can be summarised in a few points.

First, there is value in defining cognitive style and preference for change well separated from level (e.g., success, competence) and, other confounding terms (e.g., complexity).  It helps place the term innovation into a clearer, more useable, context.  A lot of confusion has probably been caused by supposing that all entrepreneurs are “just innovative”, without explaining and probing completely what this statement means.  Entrepreneurs are on average more innovative than managers, but this finding must always be checked and referred to the kind of business, the duration of the initiative, the environmental conditions, cultural context, and so on.

The results of this study suggest that entrepreneurs who direct small and middle-size businesses in manufacturing (a) in a geographical area where entrepreneurship small business is traditional and (b) who have survived successfully over a period of years, may well lie in the middle of the A-I continuum, even though they believe they are innovative.

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