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Entrepreneurial Self-Efficacy

Self-efficacy refers to individuals’ conscious belief in their own ability to successfully undertake a particular task (Bandura 1997). It is an important determinant of human behaviour. Individuals tend to avoid tasks about which they have low self-efficacy whilst being drawn towards tasks about which they have high self-efficacy. Individuals with a strong sense of self-efficacy in a given domain are likely to approach difficult problems in that domain with persistence and are less likely to be deterred by high levels of complexity or difficulty.

Chen et al. (1998) developed the construct of entrepreneurial selfefficacy (ESE) to describe the degree to which individuals believe that they are capable of performing the tasks associated with new venture management. These researchers identified a list of these tasks related to various aspects of entrepreneurship, including marketing, financial management, innovation, risk-taking and general management. Forbes (2005) noted that ESE can influence both an individual’s willingness to engage in entrepreneurship and the behaviour of those who are already entrepreneurs. ESE affects potential entrepreneurs, because individuals’ intentions to found new businesses are a function of the extent to which they perceive that it is both feasible and desirable to progress a specific business idea (Krueger and Brazeal 1994). In the case of existing ones, ESE can influence their willingness to engage in further entrepreneurial activities. Additionally ESE can influence how well existing entrepreneurs discharge their responsibilities as managers of new projects. This is important because many entrepreneurs continue to manage their ventures long after the initial start-up phase. Individuals with high levels of ESE are more likely to exhibit persistence and concentration. These behaviours are likely to enhance new venture performance. By contrast, low levels of self-efficacy are associated with performance-inhibiting behaviours, such as indecision, dis-traction and procrastination, in the performance of various tasks (Wood et al. 1990). Furthermore Krueger and Dickson (1994) concluded that individuals with high levels of ESE are better able to recognise new opportunities as these emerge.

Bandura proposed there are four ways in which an individual’s experiences can influence their self-efficacy:

  • 1. The experience obtained in the course of performing domain-relevant tasks because this provides feedback about the degree of mastery that they possess.
  • 2. The experience resulting from observing or interacting with others in ways that cause an individual to change or reassess their efficacy beliefs.
  • 3. Verbal and symbolic persuasion such as direct encouragement or support they receive from others.
  • 4. The physiological and affective states, such as anxiety, which can raise or lower individual’s senses of self-efficacy.

In developing and refining the scale developed by Chen et al., Forbes

proposed that there is a requirement to recognise the influence of certain

additional factors upon ESE. These include:

  • 1. Decentralisation, which describes the degree to which decision making is an autonomous process or is influenced by inputs from others. In start-ups the entrepreneur usually has total control of the nature of key decision, whereas in large firms, decentralisation reflects the degree to which senior management is prepared to delegate decision making to employees lower down within the organisation. Decentralisation in these latter situations is likely to affect entrepreneurs’ levels of ESE by exposing them to constructive or negative inputs from others.
  • 2. The influence of inputs from external sources, which is important to entrepreneurs because they use their membership of social and business networks to seek information, counsel and help in the course of managing new projects. Positive external input can have important psychological effects, leaving the entrepreneur feeling more confident in their ability to ensure their project will achieve a successful outcome.
  • 3. Decision comprehensiveness, which contributes to the sense of mastery that entrepreneurs experience in their role of leading a new venture. This is because in those situations where the entrepreneur is able to acquire new information that supports their perspective, this leads to a heightened level of self-confidence.

4. The availability of real-time data because this, unlike historical data, provides immediacy and access to the latest knowledge, allowing the entrepreneur to rapidly gain understanding of the latest trends and technological events that are likely to impact the success of their innovative activities. The need to acquire real-time data also has the social effect of forcing the entrepreneur to continually engage in the exchange and interpretation of information from key external sources.

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