Inside the mind of the entrepreneur

By Schumpeter

HOW do entrepreneurs think? This is a question that has produced lots of cliches (they thrive on chaos, embrace risk, break moulds) but very little hard research. Inc magazine has discovered an academic, Saras Sarasvathy, of the University of Virginia's Darden Business School, who has done some solid research on the subject. The whole article is very much worth reading, but here is the one-paragraph conclusion on how entrepreneurs differ from regular corporate types:

Sarasvathy concluded that master entrepreneurs rely on what she calls effectual reasoning. Brilliant improvisers, the entrepreneurs don't start out with concrete goals. Instead, they constantly assess how to use their personal strengths and whatever resources they have at hand to develop goals on the fly, while creatively reacting to contingencies. By contrast, corporate executives—those in the study group were also enormously successful in their chosen field—use causal reasoning. They set a goal and diligently seek the best ways to achieve it. Early indications suggest the rookie company founders are spread all across the effectual-to-causal scale. But those who grew up around family businesses will more likely swing effectual, while those with MBAs display a causal bent.