Critical Evaluation of the Relationship between the Need for Achievement and
Entrepreneurship Performance: Risk-Taking Propensity, Entrepreneurial Independence
and Motivation
Entrepreneurs are a dominant factor in an economy. They are creative and innovative, which
bring about change, growth and wealth in the economy. They also re-energise economies,
thereby creating jobs. Countries with a vibrant small and medium enterprise (SME) sector are
said to have a low rate of unemployment with their gross domestic product (GDP) continuing to
rise rapidly International Council for Small Business. The Global Entrepreneurship Monitor
stated that the Indonesian economy saw a decrease in the unemployment rate between 2011 and
2014. This decline was because of its healthy SME environment, which created more jobs in the
same period. In addition, 90% of GDP came from the SME sector. This is the reason why
entrepreneurship has been receiving increased attention from both scholars and the public press;
this is based on the contribution that entrepreneurship brings to economies. Abor and Quartey
state that SMEs contributed to about 91% of the formal business entities in South Africa, which
accounts for approximately between 52 and 57% of the GDP and a further 61% of employer
contribution.
Similarly, in Kenya, the small, medium and micro enterprises (SMME) sector comprises 98% of
all businesses in the country, employing more than 4.6 million people, and accounts for 18.4% of
the country’s GDP. These findings on the SMME sector tended to focus on entrepreneurial
activities, which are the entrepreneurship opportunities, and not on how the success came about,
which is the entrepreneurial behaviour. Zayadin states that there is doubt about the contribution
and importance of entrepreneurship in economic development although it has been extensively
studied in the recent years. Similarly, entrepreneurship plays a big role in the SME sector and is
central to the growth of their business. Therefore, decisions in this sector depend solely on the
so-called human factors, the personal characteristics of the entrepreneurs. However, to take
advantage of opportunities is neither a self-evident indication nor a matter of chance, but is a
result of clear, positively motivated business intentions and actions on the part of the
entrepreneur, driven by the belief that they can produce the desired outcomes.
Given the importance of entrepreneur success in South Africa, the Chris Hani District
Municipality (CHDM) provided funding to small businesses across the CHDM district to assist
them in expanding their business footprint and to further enhancing local economic development.
These grants were awarded to several selected business owners based on applications that met
the set criteria. The main objective of the CHDM grants was to empower entrepreneurs, ensure
the creation of sustainable enterprise development, contribute toward job creation and assist in
advancing the regional economy. CHDM received more than 300 applications for these grants
and 54 enterprises got selected. An important employment trend in CHDM is that household
employment, as well as self-employed people, surpasses both the national and provincial
averages (57, 37 and 51%, respectively) thus requiring that concerted efforts be put in place with
a view to addressing the unemployment challenges besetting the district.
In economic theory, growth is viewed as a natural phenomenon that occurs until profit is
maximised; nevertheless, not all SME owners want to grow their businesses to maximise profit.
Some entrepreneurs are determined to grow their businesses into larger businesses and attain
substantial growth because they are motivated and have a drive. Thus, to be motivated is a
constant need. Motivation is defined as an internal drive that activates behaviour and gives it
direction. Motivation is generally regarded as the drive to achieve targets and the process to
maintain the drive. The theory of motivation by McClelland provides a better understanding of
the link between the need for achievement (N-Ach) as a personal trait and entrepreneurial
activity. It is believed that individuals with an achievement need that is high easily find
themselves in entrepreneurship and this leads to a high success rate. These individuals by nature
are high achievers; they set goals for themselves, they are opportunity seekers and they find
comfort by achieving targets goals that are challenging but not beyond their capabilities.
Therefore, it is imperative to understand N-Ach as one of the entrepreneurship traits that
motivate entrepreneurs to start a business venture and to strive for survival in their businesses. It
is thus important to focus this study on the need for achievement to improve the service
performance of entrepreneurs in the Chris Hani District, Eastern Cape.
Introduction
Entrepreneurs are a dominant factor in an economy. They are creative and innovative, which
bring about change, growth and wealth in the economy. They also re-energise economies,
thereby creating jobs. Countries with a vibrant small and medium enterprise (SME) sector are
said to have a low rate of unemployment with their gross domestic product (GDP) continuing to
rise rapidly International Council for Small Business. The Global Entrepreneurship Monitor
stated that the Indonesian economy saw a decrease in the unemployment rate between 2011 and
2014. This decline was because of its healthy SME environment, which created more jobs in the
same period. In addition, 90% of GDP came from the SME sector. This is the reason why
entrepreneurship has been receiving increased attention from both scholars and the public press;
this is based on the contribution that entrepreneurship brings to economies. Abor and Quartey
state that SMEs contributed to about 91% of the formal business entities in South Africa, which
accounts for approximately between 52 and 57% of the GDP and a further 61% of employer
contribution.
Similarly, in Kenya, the small, medium and micro enterprises (SMME) sector comprises 98% of
all businesses in the country, employing more than 4.6 million people, and accounts for 18.4% of
the country’s GDP. These findings on the SMME sector tended to focus on entrepreneurial
activities, which are the entrepreneurship opportunities, and not on how the success came about,
which is the entrepreneurial behaviour. Zayadin states that there is doubt about the contribution
and importance of entrepreneurship in economic development although it has been extensively
studied in the recent years. Similarly, entrepreneurship plays a big role in the SME sector and is
central to the growth of their business. Therefore, decisions in this sector depend solely on the
so-called human factors, the personal characteristics of the entrepreneurs. However, to take
advantage of opportunities is neither a self-evident indication nor a matter of chance, but is a
result of clear, positively motivated business intentions and actions on the part of the
entrepreneur, driven by the belief that they can produce the desired outcomes.
Given the importance of entrepreneur success in South Africa, the Chris Hani District
Municipality (CHDM) provided funding to small businesses across the CHDM district to assist
them in expanding their business footprint and to further enhancing local economic development.
These grants were awarded to several selected business owners based on applications that met
the set criteria. The main objective of the CHDM grants was to empower entrepreneurs, ensure
the creation of sustainable enterprise development, contribute toward job creation and assist in
advancing the regional economy. CHDM received more than 300 applications for these grants
and 54 enterprises got selected. An important employment trend in CHDM is that household
employment, as well as self-employed people, surpasses both the national and provincial
averages (57, 37 and 51%, respectively) thus requiring that concerted efforts be put in place with
a view to addressing the unemployment challenges besetting the district.
In economic theory, growth is viewed as a natural phenomenon that occurs until profit is
maximised; nevertheless, not all SME owners want to grow their businesses to maximise profit.
Some entrepreneurs are determined to grow their businesses into larger businesses and attain
substantial growth because they are motivated and have a drive. Thus, to be motivated is a
constant need. Motivation is defined as an internal drive that activates behaviour and gives it
direction. Motivation is generally regarded as the drive to achieve targets and the process to
maintain the drive. The theory of motivation by McClelland provides a better understanding of
the link between the need for achievement (N-Ach) as a personal trait and entrepreneurial
activity. It is believed that individuals with an achievement need that is high easily find
themselves in entrepreneurship and this leads to a high success rate. These individuals by nature
are high achievers; they set goals for themselves, they are opportunity seekers and they find
comfort by achieving targets goals that are challenging but not beyond their capabilities.
Therefore, it is imperative to understand N-Ach as one of the entrepreneurship traits that
motivate entrepreneurs to start a business venture and to strive for survival in their businesses. It
is thus important to focus this study on the need for achievement to improve the service
performance of entrepreneurs in the Chris Hani District, Eastern Cape.
Entrepreneurship has become popular and a researched area in the recent years. Thaief and
Mudalifah conducted a study on the influence of LOC, N-Ach and entrepreneurial intention. The
results of their study showed that the LOC of students makes their entrepreneurial intention
stronger, and as a result, it affects their N-Ach to pursue or achieve their goals and targets. A
study conducted by Chavez found that entrepreneurs tend to have a high N-Ach compared with
non-entrepreneurs. On the other hand, the psychology of individuals as measures of success
through satisfaction, feeling of gratitude and preparedness is a major personal characteristic of
entrepreneurs. According to Gorgievski and Stephan, the power and strengths are embedded
deep within the psychology of individual entrepreneurs. Entrepreneurs understand that success is
not only in monetary value but is also perceived psychologically. The personal characteristics of
entrepreneurs are not limited to the ones discussed above, but due to the scope of this research,
the researcher will limit the discussion to the ones discussed; the same characteristics will be
further discussed in detail below.
Entrepreneurial need for achievement
Entrepreneurs are viewed as people who are guided by N-Ach, which is a drive to excel, advance
and grow. McClelland stressed that the most important factor for an entrepreneur is achievement
orientation. Entrepreneurs are people who believe in success, and it is understood that not
everyone who pursues entrepreneurship can succeed, but the motive is to succeed in the business.
Success in any business venture comes only to those who are persistent and believe in achieving
the goals. In a study that comprised 700 business students in one university in the United Arab
Emirates, the personality dimensions of individualism/collectivism as well as
introversion/extraversion, alongside N-Ach, were examined to check their relative effects on
entrepreneurial potential. The findings indicated that N-Ach (as a measure of motivation) is the
most significant determinant of entrepreneurial potential. This supports the idea that people who
are high in N-Ach are more likely to have higher levels of entrepreneurial potential as an
indication of their capacity and desire to engage in entrepreneurial activities.
According to Adesanya, external incentives have the potential to motivate entrepreneurs to be
committed and to set goals that will yield good results and see the business grow. Incentives like
financial support either from the private sector or from government subsidies can attract
individuals to enter the field of entrepreneurship and succeed in business. In addition, the
government tax cut for certain categories of small business enterprises (SMEs) is meant to
motivate the entrepreneurs to grow their businesses thereby bringing more innovative ideas that
will make the entrepreneurs succeed in their entrepreneurial ventures. Incentives can be
generally understood as the influential factor and a motivator for entrepreneurship success since
they make the entrepreneur commit more energy and time to grow the venture and also set goals
that would be achievable to them.
Risk-taking and service performance
The question of why some entrepreneurs do not succeed with their businesses, while others do
survive is one basic concern of entrepreneurial scholars nowadays. When starting entrepreneurial
ventures based on discoveries and innovations entail a great deal of risk. In new businesses that
pursue unexplored business opportunities with the intent of achieving substantial growth and
above-average performance, the risk is an inescapable reality. According to the trait approach,
one characteristic an entrepreneur should have is the ability to take risks. Chimucheka et al.
suggested that the trait of risk-taking, along with creativity and flexibility, is a better indicator of
the likelihood of starting a business than is achievement motivation. Taking risks is an inherent
element to entrepreneurship, given the effect, it has on the constraining resources of the
individual. Risk-taking involves acting, despite uncertainty or the presence of competitive
threats. Risk-taking would take into account all of the resources that the entrepreneur or
organisation would be willing to risk while pursuing this opportunity, such as profit, time and
other less apparent opportunity costs.
A risk is an uncertain event that if it occurs, may either have a substantial positive or negative
effect on a person. Therefore, the degree of risk on a person’s work-life may differ, but no one
can be identified and specified as a person working in a risk-free environment. Similarly, the
work-life of entrepreneurs is also faced with different types of risks. As defined by Erasmus et al,
entrepreneurship is “the process of taking a risk and converting it into profit.” This definition
simply suggests that risk-taking is the prime and important characteristic of entrepreneurship.
Risk and entrepreneurship have a positive and very significant relationship. Without taking risk,
there is no business, starting a business or for a business to commence, requires risk-taking from
the side of the entrepreneur who is willing to even lose where profits are not made. Rishipal
argued that for the successful establishment, conduction and management of the business, an
entrepreneur should be adaptive to risk. Risk adaptiveness is a mental state of the effectiveness
and capability of an entrepreneur, which is rationally affected by the resulting negative elements
of risk-taking, such as fear, excitement, uncertainty, insecurity, danger, threat, pressure and
expectations for loss.
Risk-taking as a trait of entrepreneurs emphasises that individuals with high needs for
achievement would have reasonable tendencies to take the risk. However, the literature on
entrepreneurship claims that the entrepreneurial process is usually undertaken under high
uncertainty. Thus, entrepreneurs are expected to accept higher risks. Therefore, a lack of
agreement on the nature of risk-taking is observed in the scientific literature. Several meta-
analyses are related to personality traits in the entrepreneurship domain, and several studies
aiming to disclose differences between entrepreneurs and managers or employees investigated
risk-taking. However, conducted research provided mixed results and in many cases did not
differentiate between entrepreneurs and other population groups.
Psychological capital of entrepreneurs
Linked to service performance is the aspect of a modern entrepreneurial mindset of job
satisfaction, which then expresses the positive attitude of the entrepreneur about their business.
Mokoena and Dhurup ascertained that job satisfaction has a positive relationship with efficiency,
performance and organisational commitment. Similarly, job satisfaction could be generalised as
being associated with the positive mood and positive psychology of the entrepreneur. The
psychological capital (PsyCap) is a structure that includes positive outcomes, in both personal
and organisational levels, and improves human performance. PsyCap relates positively to work
performance, desired psychological outcomes and the general well-being of humans and in this
case entrepreneurs. The most recent empirical evidence in an entrepreneurship study shows a
positive relationship, specifically between PsyCap and satisfaction among entrepreneurs.
In theory-based research, PsyCap is described as “a higher-order core construct consisting of
four positive psychological resources,” which defines the features of PsyCap such as hope,
confidence, optimism, resilience and efficacy. It can be said that PsyCap is a combination of all
these four elements and that it can be “measured, developed, and effectively managed” for
improving work performance. Hope generally gives the entrepreneur some form of
encouragement and motivation that through trust, the goals or objectives will be achieved. At the
individual level, many entrepreneurs voluntarily keep faith in their ventures, hoping for success,
and despite the facts that they know, few would get through, while the majority march into the
Death Valley as observed by Bean. In essence, the need for achieving is desired goals requiring a
sense of agency and expectations, which provides people with an internalised determination and
willpower to invest the energy.
When one is optimistic, it means the person has a positive expectation for the future, regardless
of circumstances. Optimistic individuals accept new ideas and have positive emotions.
Furthermore, optimistic people expect that positive situations will happen that serves as positive
PsyCap Hmieleski and Carr. demonstrated that optimism and personal well-being have a positive
relationship in PsyCap. Cavus and Gokcen stated that optimism can be defined as a
psychological intention and expectation to hope for the best possible and positive outcome,
which can positively influence peoples’ mental and physical health.
Psychological resiliency is characterised as the ability for bouncing back, focusing on goals and
successes. Resilience as a dimension of PsyCap is something that entrepreneurs have
accumulated to be successful in the work they do. In the meantime, research by Luthans and
Youssef supports that psychological resiliency is the coping skills of people in case of
uncertainty, negative situations and obstacles; and according to Çetin and Basim, it contains in
itself, the other components hope, self-efficacy and optimism.
Self-efficacy originates from Bandura’s study widely used and accepted social cognitive theory.
This theory first developed the theory of self-efficacy based on the premise that individuals are
proactive agents as opposed to passive reactors to their environment. The instability in the
business environment for new business establishments saw many researchers postulate that
entrepreneurs succeed in their business because of a strong sense of personal commitment (self-
efficacy) to implement their dreams and a keen eye for innovation to identify new products and
markets. Self-efficacy represents the general belief of people while they exhibit their
performances and make a sense beyond the actual abilities that lead to completing tasks. It can
be said that high self-efficacy can influence motivation on both positive and negative sides. Self-
confident people know how to improve their motivation. They choose challenging tasks to
extend their performance and motivate themselves against the obstacles faced while working for
accomplishing goals. Stajkovic and Luthans argued that there is a strong and positive
relationship between self-efficacy and performance.
Entrepreneurial motivation
Motivation is described as a desire to overcome a goal or value feeling activated, goal-driven,
incentivised, being inspired or an impulse to be moved to do something and can be explained as
someone being motivated. However, a person who feels no inspiration, incentive or drives to be
moved to do something is understood to be unmotivated. Motivation is a broad and complex
field with various theories. For example, Bruno et al. explained how intrinsic motivations are
intertwined with the level of achievement.
Entrepreneurial motivation is important in the discussion of entrepreneurship. Looking at the
discussion of entrepreneurial characteristics above, it is not enough to explain what makes an
individual decide to pursue entrepreneurship. Bringing the issue of entrepreneurial motivation to
the study is fundamental to understanding the reasons why individuals pursue entrepreneurship.
Stephan et al. stated that entrepreneurial motivation is a psychological process in which not all
the motives may be influenced with the same force; it differs with the awareness levels of the
individuals and factors responsible for the motivation. Motivation is classified along some
dimensions that are better predictors of growth expectations and business survival and in turn the
entrepreneurial success. These dimensions of entrepreneurial motivation are discussed in the
following subsections.
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