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How entrepreneurs think: financial decisions for the long or short term

How entrepreneurs think: financial decisions for the long or short term The purpose of this paper is to suggest that different start-up motivations make entrepreneurs pursue different kinds of new business performance, which in this study are expressed in financial terms (i.e. return on assets). The authors posit that so-called extrinsic motivation urges entrepreneurs to be more short-term oriented, while their intrinsic motivation encourages a longer-term business vision. Additionally, this paper explores how intrinsic and extrinsic entrepreneurship motivations combine and produce financial dilemmas for entrepreneurs.Design/methodology/approachThe analyses are based on 300 entrepreneurs across diverse industries in Belgium. Data was collected for this study through structured interviews with entrepreneurs combined with a company questionnaire. Financial data was obtained through a government database.FindingsResults confirm that extrinsic entrepreneurship motivation boosts new business short-term financial performance, whereas intrinsic motivation contributes to the firm’s longer-term financial returns. This paper also shows that a mix of intrinsic and extrinsic motivations directs entrepreneurs toward different profitability levels during the organization’s survival and early-establishment phase.Originality/valueResearch on entrepreneurship has not yet corroborated that motivations can be personally conflicting, thereby saddling the entrepreneur with dilemmas that may manifest into different levels of business performance. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Business Strategy Emerald Publishing

How entrepreneurs think: financial decisions for the long or short term

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0275-6668
DOI
10.1108/jbs-04-2020-0068
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to suggest that different start-up motivations make entrepreneurs pursue different kinds of new business performance, which in this study are expressed in financial terms (i.e. return on assets). The authors posit that so-called extrinsic motivation urges entrepreneurs to be more short-term oriented, while their intrinsic motivation encourages a longer-term business vision. Additionally, this paper explores how intrinsic and extrinsic entrepreneurship motivations combine and produce financial dilemmas for entrepreneurs.Design/methodology/approachThe analyses are based on 300 entrepreneurs across diverse industries in Belgium. Data was collected for this study through structured interviews with entrepreneurs combined with a company questionnaire. Financial data was obtained through a government database.FindingsResults confirm that extrinsic entrepreneurship motivation boosts new business short-term financial performance, whereas intrinsic motivation contributes to the firm’s longer-term financial returns. This paper also shows that a mix of intrinsic and extrinsic motivations directs entrepreneurs toward different profitability levels during the organization’s survival and early-establishment phase.Originality/valueResearch on entrepreneurship has not yet corroborated that motivations can be personally conflicting, thereby saddling the entrepreneur with dilemmas that may manifest into different levels of business performance.

Journal

Journal of Business StrategyEmerald Publishing

Published: Jul 7, 2021

Keywords: Intrinsic motivation; Extrinsic motivation; Return on assets; Entrepreneurship motivation; Financial dilemmas; New business performance

References