What makes entrepreneurs entrepreneurial?

Professionals who work closely with them and researchers who study them have often speculated about what makes entrepreneurs “entrepreneurial”. Of course, entrepreneurs also love to hold forth on this topic. But while there are as many war stories and pet theories as there are entrepreneurs and researchers, gathering together a coherent theory of entrepreneurial expertise has thus far eluded academics and practitioners alike.

What are the characteristics, habits, and behaviors of the species entrepreneur? Is there a learnable and teachable “core” to entrepreneurship? In other words, what can today’s entrepreneurs such as Rob Glaser and Jeff Bezos learn from old stalwarts such as Josiah Wedgwood and Leonard Shoen? Or even within the same period in history, what are the common elements that entrepreneurs across a wide variety of industries share with each other? In sum, is there such a thing as “entrepreneurial thinking” that can be applied across space, time and technology?

In 1997, I set out on a rather perilous but exhilarating journey to investigate this question. Traveling across 1 7 states in the US over several months, I met with 30 founders of companies ranging in size from $200M to $6.5B and spanni ng a  variety  of  industries from  steel  and railroad to teddy bears and semiconductors and bio-tech.   The  idea  behind the study was not merely to interview these founders, but to get behind  their stories and understand how they reason about specific problems in transforming an idea into an enduring firm. The entrepreneurs worked their way through a 17-page problem set over two hours, talking aloud continuously as they each  solved exactly the same ten decision problems to build a company starting with exactly the same product idea. Rigorous analyses of the transcribed tapes led to rather surprising but eminently teachable principles. This set of principles, when put together, rested on a coherent logic that clearly established the existence of a distinct form of rationality that we have all long recognized intuitively as “entrepreneurial”. For reasons that will become clear in the next section, I have termed this type of rationality “effectual reasoning”…

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