Entrepreneurship: Self-Efficacy and Business Performance

This essay explores the concept of entrepreneurial self-efficacy and its relationship with business performance. It also discusses the difference between an entrepreneur and a small business owner.

Entrepreneurship 0
Entrepreneurship
Student’s Name
5/13/2019

Entrepreneurship 1
Entrepreneurship refers to the willingness and the ability to create and manage the business
venture. An entrepreneur analyses the opportunity in the dynamic environment and shapes it
into a high potential venture. The entrepreneurial spirit is characterized by innovation and
risk taking. The entrepreneur manages the activities and runs the business with limited
resources. The concept of entrepreneurship is evolving because it leads to the development of
the economy (Kirzner, 2015).In the further paragraphs, the essay will reflect upon the concept
of entrepreneurial self-efficacy and its relationship with business performance. It will also
reflect the difference between an entrepreneur and a small business owner
An entrepreneur is recognized as an innovator who analyses the opportunity in the business
environment and shapes it into a high potential venture. An entrepreneur manages the
activities of the business and assumes the risk associated with the business. The entrepreneurs
have the ability to balance personal and financial risk and effectively manage the
complexities of the business environment. They have the passion to convert an idea into a
potential business. An entrepreneur manages the resources and motivates the team to grow
the business into a profitable venture. The concept of entrepreneurship is evolving because it
leads to economic development and provides job opportunities to various sectors (Bujor and
Avasilcai, 2016).
According to Albert Bandura, the concept of self-efficacy is defined as the belief of an
individual in their personal capability to accomplish a job or specific set of task. It differs
from self-confidence and arrives from past accomplishments and experience of entrepreneurs.
The factors that influence self-efficacy includes the past mastery experience of the
entrepreneurs. It helps in analyzing the tolerance of the failure and is measured in terms of
past successful experiences. The psychological and social persuasions play a major role in
measuring the self-efficacy of an entrepreneur (Bandura, 2018).

Entrepreneurship 2
Entrepreneurial self-efficacy determines the belief of the individual in achieving
entrepreneurial outcomes. It is used as a characteristic and distinct feature of an entrepreneur.
The concept of self-efficacy plays a major role in determining entrepreneurial actions. The
feeling of personal efficiency determines the behaviour of the entrepreneur. Self –efficacy is
considered as the major tool in measuring the behaviour of the entrepreneurs. It helps in
influencing the behaviour of entrepreneurs. It affects the performance of the entrepreneurs by
influencing the perceptions, motivations and interest. It reduces the self-doubts and enables
an entrepreneur to perform better. An entrepreneur who possesses a high level of self-efficacy
has the ability to handle the fluctuations in the business environment and easily able to
recover from failures. They effectively perform and face the challenges in entrepreneurial
activities (McGee and Peterson, 2017).
The social cognitive theory of Albert Bandura considers people as the active agents who both
influence and get influenced by their environment. The main component of the theory is
observational learning. According to the author the entrepreneurs learn from the behaviour of
the models. They observe the behaviours and get influence from the environment.
Observational learning includes paying attention to the behaviour of the models and retaining
them in the memories of the entrepreneur. Further, the observed behaviour is implemented
into action to achieve the desired result and finally getting motivated by achieving the desired
result. It is analysed that self- efficacy plays a major role in analysing the behaviour of
entrepreneurs. It depends upon the belief of the entrepreneur to imitate the behaviour of the
models and achieve the desired result. Perceptions of self-efficacy influence the choices of
people and beliefs in themselves to achieve their goals. It motivates the entrepreneurs to take
actions and to implement change in personal and professional growth. The measurement of
the self-efficacy is analysed by the goals the entrepreneur chooses and the efforts undertaken
for the achievement of the desired result (Baron et al, 2016).

Entrepreneurship 3
It is analysed that there is a positive relationship between entrepreneurial self-efficacy and
firm performance. The degree of self-efficacy influences the actions of the entrepreneurs. It
helps in motivating the entrepreneurs to achieve the desired result through observational
learning. It helps the entrepreneur to fight the challenges and effectively handle the
complexities of the business environment. The higher degree of self-efficacy promotes the
entrepreneur to take a risk and accept the challenges of the business. They have the ability to
turn the venture into a high potential profitable business. It further motivates them to observe
and learn from the models and conduct the behaviour accordingly. It guides the
entrepreneur’s actions and intentions. The positive efforts of the entrepreneurs directly affect
the performance of the business and collectively achieve the desired result. It helps to
compete and sustain the business in a competitive environment (McGee and Peterson, 2017).
The social cognitive theory of Albert Bandura describes the positive relationship between the
self-efficacy and performance of the individual as it brings the change in the personal and
professional growth of entrepreneur and motivates them to do something that is different
from others. It affects the performance of the entrepreneurs through observing the models and
learning from their actions. A higher level of self-efficacy motivates the entrepreneurs that
they can perform specific tasks and have the ability to achieve the desired result (Cardon and
Kirk, 2015).
Apart from the positive relationship between self-efficacy and performance of individual it
also leads to negative results. High self-efficacy diminishes the perceived discrepancy
between current state and goal, induces complacency, reduces motivation, and obstructs
performance. The entrepreneurs perceive that there is not much discrepancy between current
and the desired state which in turn leads to lower motivation and lowering if the efforts to
achieve the desired result and affects the performance of the individual and the business. The
efforts of the entrepreneurs decrease and utilise the limited resources to achieve the result.

Entrepreneurship 4
This directly hampers the performance and in turn, reduces the profitability of the business
(Khedhaouria et al, 2015).
It is analysed that the small business owners are often recognized as an entrepreneur but both
have huge difference due to the difference in traits of business owners and entrepreneurs.
Risk is considered as the main factor for the difference. The entrepreneurs undertake a huge
risk in the business. They may or may not pay the risk. It is considered as the essential trait of
an entrepreneur to undertake the risk and shape the opportunity into a high potential venture.
On the other hand business owners does not undertake risk they avoid the decisions that
involve a high risk to the business (Burgers and Van de Vrande, 2016).
The entrepreneurs have a high vision to achieve big while the business owners focus on short
term goals and day to day operations of the business. They do not focus on setting big picture
goals. Innovation is the main focus of entrepreneurs. They analyse the business opportunity
and turns that idea into a successful business. They are involved in bringing something new
to the business. Contrary to the above, business owners do not practice innovation and
continuously undertake the activities that help them in sustaining the business (Mauer et al,
2017).
The difference in passion is also used to differentiate between entrepreneurs and business
owners. The business owner’s dreams to achieve success to support its family and for the
achievement of the personal goals while the entrepreneurs are passionate about bringing
change in the world. They aim to bring a difference in the world and introduce something that
is extraordinary. Earning money is not the only motive of the business (Ng and Lucianetti,
2016).
Entrepreneurs considers their business as asset and focus on growing the business and selling
it at profit while the business owners are more sentimental towards their business and never

Entrepreneurship 5
aim to sell their business to others. They focus on sustaining the business for longer period of
time and efficiently achieving the gaols of the business (Mayhew, 2019).Entrepreneurs never
stop. They never get satisfied from their status quo and aims to achieve bigger in life while
the business owners gets satisfied from the current performance of the business and puts the
efforts to sustain the current position (Marks, 2012).
From the above discussion it is critical to note that the concept of entrepreneurship is
evolving because it helps in developing the economy and provides job opportunity in various
sectors. It is analysed from the above paragraphs that the entrepreneurs are more passionate
and have a high visionary power in comparison to business owners. The entrepreneurs
undertake higher risk and aims to bring change in the real world. The entrepreneurial self-
efficacy plays the major role in analysing the behaviour and the intentions of the
entrepreneur. Higher levels of self-efficacy motivate the entrepreneur to face the challenges
and attain higher level of success. It directly influences the performance of the individuals
and the business.

Entrepreneurship 6
References
Bandura, A. (2018) Albert Bandura and Social Learning Theory. Learning Theories for Early
Years Practice, 63
Baron, R.A., Mueller, B.A. and Wolfe, M.T. (2016) Self-efficacy and entrepreneurs' adoption
of unattainable goals: The restraining effects of self-control. Journal of business
venturing, 31(1), pp.55-71
Bujor, A. and Avasilcai, S. (2016) The creative entrepreneur: A framework of
analysis. Procedia-Social and Behavioral Sciences, 221, pp.21-28
Burgers, H. and Van de Vrande, V. (2016) Who is the corporate entrepreneur? Insights from
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Cardon, M.S. and Kirk, C.P. (2015) Entrepreneurial Passion as Mediator of the Self–Efficacy
to Persistence Relationship. Entrepreneurship theory and practice, 39(5), pp.1027-1050
Khedhaouria, A., Gurau, C. and Torres, O. (2015) Creativity, self-efficacy, and small-firm
performance: the mediating role of entrepreneurial orientation. Small Business
Economics, 44(3), pp.485-504
Kirzner, I.M. (2015) Competition and entrepreneurship. United States: University of Chicago
press
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[Online]. Available from: https://www.forbes.com/sites/quickerbettertech/2012/06/06/the-
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13/05/19]

Entrepreneurship 7
Mauer, R., Neergaard, H. and Linstad, A.K. (2017) Self-efficacy: Conditioning the
entrepreneurial mindset. In Revisiting the Entrepreneurial Mind, pp. 293-317
Mayhew, R. (2019) Differentiate Between an Entrepreneur & a Small Scale Business Owner
[Online]. Available from: https://smallbusiness.chron.com/differentiate-between-
entrepreneur-small-scale-business-owner-59415.html [Accessed 13/05/19]
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Ng, T.W. and Lucianetti, L. (2016) Within-individual increases in innovative behavior and
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