Entrepreneur: Venture Capital and Social Skills Essay

Entrepreneurs play a key role in any economy. These are the people who have the skills and initiative necessary to take good new ideas to market and make the right decisions to make the idea profitable. The reward for the risks taken is the potential economic profits the entrepreneur could earn. There is a large literature devoted to the study of entrepreneurshipi n economics and related disciplines. The origin of the studies of entre-preneurship is the mature market economy. Jo-seph Schumpeter (1934) pioneered studies of entrepreneurs, writing that entrepreneursa re in-novators integrating resources in production for the marketplace. William J. Baumol (1968) and Harvey Leibenstein (1968) are among those who emphasize that entrepreneurshipis an en-gine of economic development Entrepreneurs’ social skills—specific competencies that help them interact effectively with others—may also play a role in their success. A high level of social capital, built on a favorable reputation, relevant previous experience, and direct personal contacts, often assists entrepreneurs in gaining access to venture capitalists, potential customers, and others. Once such access is gained, the nature of the entrepreneurs’ face-to-face interactions can strongly influence their success.

Specific social skills, such as the ability to read others accurately, make favorable first impressions, adapt to a wide range of social situations, and be persuasive, can influence the quality of these interactions. Moreover, by helping entrepreneurs expand their personal networks, social skills may also contribute to their social capital. Because social skills can readily be enhanced through appropriate training, entrepreneurs who fate advantage of such opportunities may reap important benefits. Social skills come into play in many situations especially ones that are tense or stressful. Thus, their effects can be long-term and long-lasting, and may continue to shape relations between entrepreneurs and other persons for as long as they do business. Social skills are something that entrepreneur can always work on. The entrepreneur spirit and drive is not. Social skills are extremely important in that a person will be dealing with people on a day to day basis no matter what area of business. Literature Review

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Webster’s – someone who runs a business at his or her own financial risk. An entrepreneur is a person who undertakes the creation of an enterprise or business that has the chance of profit (or success). The view of entrepreneur as risk taker is probably most associated with Knight. Knight’s contribution was to draw a distinction between risk, which involves recurring events whose relative frequency can be known from past experience, and uncertainty, arising from unique events which can only be subjectively estimated. Risk is considered to be a relatively insignificant problem in that it can be accommodated through pooling and insurance. In contrast, uncertainty requires an economic functionary, the entrepreneur, whose job it is to decide what to do and how to do it in the face of uncertain ties. Knight proposed that there is diversity among individuals with regard to confidence in one’s judgment and the disposition to act on those judgments. Those who are “confident and venturesome ‘assume the risk’ or ‘insure’ the doubtful and timid by guaranteeing to the latter a specified income in return for an assignment of the actual results” (Knight, 1921 p. 269). Entrepreneurs re-innovators integrating resources in production for the marketplace (Schumpeter, 1934). Among those who emphasize those entrepreneurshipis an engine of economic development (Baumol & Leibenstein, 1968).

An entrepreneur as an innovative person who starts or expands his business venture and in the process helps destroy the prevailing nonmarket institutions in order for his business venture to be successful. Entrepreneurs must possess skills beyond those of a traditional entrepreneur, such as dealing with government officials and public opinion. Moreover, institutional entrepreneurs face more risks (LI, FENG, & JIANG, 2006). A typology of entrepreneurs and firms is built on the basis of the work expectations of the former; the entrepreneurial types are then further characterized in terms of education, age, origin and other personal characteristics. Each entre-preneurial type is then described in terms of the behavior (strategy) of the firms they manage and in terms of the results obtained in their activity. The personal characteristics of entrepreneurs will also have an influence on the type of firm that will be created, and on the way that it will be managed (Lafuente & Salas, 1989, pp17-30). As the English novelist Samuel Butler put it: “We are not won by arguments that we can analyze, but by tone and temper, by the manner which is the person himself.” A number of specific skills play a role in determining the capacity of individuals to interact effectively with others.

These include the ability to read other persons accurately, to make a good first impression on them, and to persuade or influence them. The effects of skill in interacting with others may persist and continue to shape the nature of entrepreneurs’ relations with such persons on a long term basis. Capitalists, customers, or suppliers ultimately respond to the entrepreneurs’ actual behavior—what they say or do not solely to the entrepreneurs’ reputation or status. Social skills come into play in many situations especially ones that are tense or stressful. Thus, their effects can be long-term and long-lasting, and may continue to shape relations between entrepreneurs and other persons for as long as they do business. Four specific social skills were identified as being most useful to entrepreneurs’ success. These skills are social perception, impression management, persuasion and influence, and social adaptability (Baion & Markman, 2000) For instance, in a recent survey. Inc. magazine reported that 57 percent of its sample of 500 high-growth private U.S. companies were started by at least two founders. To the extent that these partners possess excellent social skills, face-to-face interactions between them should be facilitated and this, in turn, may contribute to the success of their new ventures.

In order to make the research paper on “Importance of social skills in entrepreneurship”, we needed to collect primary data first. For this primary data, we carried out a survey with some open ended questions. We kept our sample size 10 for the survey, which means we took a survey of 10 entrepreneurs or businessmen. For secondary data, we depended on journals. Some of these journals were provided by our course instructor. We collected the rest of the journals from internet and library.

Primary Data Analysis
1. What social skills, specifically, will be most useful to entrepreneurs? Most useful social skills for business success are not same for every entrepreneur. It varies entrepreneur to entrepreneur. Two different types of entrepreneurs reported that two aspects of these entrepreneurs’ social competence—their social adaptability and social perception—were significant predictors of their financial success. Similarly, other entrepreneurs think that, there is a positive relationship between entrepreneurs’ personal appearance (one aspect of impression management) and their financial success.

That means the more favorable entrepreneurs’ personal appearance, the greater their financial success. Indeed, entrepreneurs rated as having the most favorable appearance earned more from their businesses than those rated as having the least favorable appearance. In other words, the more favorable entrepreneurs’ appearance, the higher their social competence, and this competence, in turn, significantly predicted their financial outcomes. In sum, a growing body of empirical evidence offers support for the suggestion that entrepreneurs’ social competence may indeed play an important role in their success.

2. How social skills help an entrepreneur to enhance business network? Entrepreneurs said that, social skill helped them to gain access to venture capitalists, potential customers, suppliers and other persons who play a role in their ultimate success. Social skills provided them an important type of credential—a favorable social identity which helped to enhance access to information. They think the more people one knows, the more information, and often, the more accurate information; one receives, and increased cooperation and trust from others.

3. Which types of entrepreneurial business is successful- single or team of entrepreneurs? A substantial proportion of new ventures are founded by teams of entrepreneurs rather than single individuals. Most of interviewed entrepreneurs suggest that the team interpersonal process impacts performance over the life cycle of the business. The benefits of teams include more internal checks and an improved array of ideas and abilities. They think, a large proportion of start-ups involve the efforts of two or more entrepreneurs. In addition, it seems reasonable to suggest that high levels of social competence on the part of these entrepreneurs will facilitate face-to-face interaction between them, and may, in this manner, contribute to the success of their new ventures.

4. How do social skills influence entrepreneurs’ efforts to start new business ventures? The interviewed entrepreneurs suggest that social skills play an important role to start new business ventures and in entrepreneurs’ success because such skills facilitate effective relations between founding partners, as well as with many people outside and inside their companies, and assist entrepreneurs in establishing business alliances that are very valuable to their new ventures. They think that excellent social skills may prove beneficial to entrepreneurs involves face-to-face interactions between the entrepreneurs and many persons outside their companies. Effective interactions may assist entrepreneurs in performing tasks that are crucial to their success, such as raising needed capital, attracting and se-electing competent employees, and persuading customers and suppliers to do business with their company under favorable terms.

5. How do social skills can contribute to enhance entrepreneurs’ social capital? Most of the interviewed entrepreneurs think, social capital is the result of social competence or skills. Individuals who inter-act effectively with others leave a residue of positive feelings and good will behind them. This residue can help such persons expand their personal networks and acquire excellent reputations-important ingredients in social capital. Increased social capital can facilitate entrepreneurs’ access to financial capital, information, and markets.

6. What the entrepreneur does, not who the entrepreneur is?

That is, on entrepreneurs’ behavior rather than on their supposedly stable traits. The entrepreneurs suggested in their interview that one aspect of entrepreneurs’ behavior that may well influence their success is their social competence—the extent to which they possess and employ discrete social skills that enhance their ability to interact effectively with others like venture capitalists, potential partners, employees, customers.

7. What do you think about the training or learning of social skills, or do you believe people born with certain social skills? Some of interviewed entrepreneurs think social skills are not about by-born things. It is all about learning from the society. Some of them believe that people born with
certain social skills. Most of interviewed entrepreneurs think that training or learning of social skills would be especially valuable in cases where entrepreneurs’ ideas are sound, and where their experience, technical competence, and motivation are all high, yet they fail in their efforts to start new ventures. Such negative outcomes may stem from a lack of social skills on the part of the entrepreneurs. By learning social skills can assist them to avoid these pitfalls, and can contribute to their ultimate success.

8. Do you think, social skills have got more importance than technological knowhow? The interviewed entrepreneurs idea or thinking about the importance of social skills and technological knowhow are different. Some of entrepreneurs reported that social skills and technological knowhow positively related things for business. Both are important at their own place. On the other hand, some of the entrepreneurs think, social skills are more important compare to technological knowhow. Their argument about this statement is technological knowhow can easily getable, but social skills are a long term process and difficult to acquire.

Findings and Discussion
The primary and secondary data analysis results support the view that entrepreneurs’ social skills—competencies that enable them to interact effectively with others—play a role in their financial success. We also propose that social skills play an important role. Perhaps the best means of illustrating this point is through the following simple exercise. Consider this question: How do organizations select new employees-especially those who will play a key role? Is this function carried out solely on the basis of the candidates’ social capital, such as their reputation and referrals? Probably not. In most cases, we believe, this is a beginning rather than an end to the selection process. Only candidates possessing high levels of social cap-ital are initially considered-persons with favor-able reputations, an established record in the field, a degree from one of the right schools, work experience with good employers, and so on.

Once a short list of persons possessing high social capital is assembled, however, it is the impression the candidates make on the individuals involved in the final selection that largely deter-mines whether they are actually hired. Some candidates for employment appear to walk on water prior to a visit, but once present in the flesh, quickly sink beneath the surface. Such individuals possess high levels of social capital, but are lacking in skills that permit them to interact effectively with others, and this becomes readily apparent during face-to-face encounters with them. The present research mainly investigates the role of social skills in order success in entrepreneurial business. After analyzing primary and secondary data we have found some important roles of social skills in the business success.

Possession of a high degree of social competence may also prove beneficial to entrepreneurs in the context of face-to-face interactions with many persons outside their companies—venture capitalists, potential customers and employees, to name just a few. For instance, Larson (1991) studied partner networks in a comparative case analysis and found that communication in these involved continually “selling” the partner on the advantages of the exchange. Similarly, Niederkofler (1991) showed that carefully-planned interactions were important in the evolution of strategic alliances. Effective interactions with others may assist entrepreneurs in performing such important tasks as raising needed capital, attracting and selecting competent employees, and persuading customers and suppliers to do business with their company under favorable terms. Completing such tasks successfully, in turn, may contribute to entrepreneurs’ overall success.

Social competence is a crucial to building the organization internally. Bird (1989) notes that entrepreneurs create organizations intentionally, choosing values to guide the culture of the new venture. These values must be effectively articulated to gain participation, and commitment from employees. For example, in a study of the factors influencing the success of new ventures, Duchesneau and Gartner (1990) found that entrepreneurs whose companies are successful engage in more communication with others, and are more effective in this activity, than entrepreneurs whose companies fail.

Additional support for the view that entrepreneurs’ social competence (which we view as one important aspect of their behavior) can influence their financial success is provided by several findings and proposals in extant literature on entrepreneurship. In a discussion of cooperation between entrepreneurs and venture capitalists, Cable and Shane (1997) note that such cooperation may increase when the entrepreneur and venture capitalist share a positive social or business relationship. There are some social skills which are the most important for entrepreneurs to run a successful business. We carefully reviewed the extensive body of literature on social skills with two criteria firmly in mind: relevance of each social skill to outcomes in business settings, and relevance to tasks performed by entrepreneurs. Four specific social skills were identified as being most germane to entrepreneurs’ success. These skills are social perception, impression management, persuasion and influence, and social adaptability. Social Perception

Social perception refers to accuracy in perceiving others, including perceptions of others’ motives, traits, and intentions. It refers to the ability to correctly gauge current moods or emotions of others, their underlying motives, and their personal characteristics. This skill appears to be very useful in many business contexts. Skill in social perception is relevant to entrepreneurship in several ways. For example, consider the process of negotiation. Entrepreneurs engage in this activity frequently, especially during the early days of their new ventures. Social perception is also relevant to another key task performed by entrepreneurs- choosing partners and key employees. Ability to perceive accurately the emotions, traits, motives, and intentions of others. Examples of potential relevance to entrepreneurial success: Making presentations to investors and customers, attracting and selecting partners and employees, conducting negotiations.

Impression Management
Impression management involves proficiency in a wide range of techniques for inducing positive reactions in others-from efforts to enhance one’s own appearance and image, through agreeing with others, flattering them, and giving them small gifts during an initial meeting. Skill with respect to impression management has been found to make job applicants more likely to get the job,’6 and to boost the ratings received by employees in annual performance reviews. Skill at impression management may also be extremely
helpful to entrepreneurs in their efforts to obtain needed capital. Overt efforts at impression management are effective, so being adept at this skill can indeed yield important benefits for entrepreneurs. Tactics designed to induce liking and a favorable first impression by others. Examples of potential relevance to entrepreneurial success: Obtaining financing, attracting key employees, dealing with customers and suppliers. Persuasion and Influence:

Persuasion and influence are skills for changing the attitudes or behavior of others in desired directions. Because other people don’t always share our views, and often behave differently from the way we would prefer, most of us try to influence the attitudes, beliefs, or behaviors of others every day. Individuals vary greatly in their ability to use such tactics. Research findings indicate that such differences are related to success in a wide range of occupations, including sales, law, and medicine. Ability to change others’ attitudes and/or their behavior in desired directions. Examples of potential relevance to entrepreneurial success: Obtaining financing, recruiting key employees, dealing with customers and suppliers, conducting negotiations. Social Adaptability:

Social adaptability involves the ability to adjust to a wide range of social situations and to feel comfortable with individuals from diverse back-grounds. People high in social adaptability are able to talk to virtually anyone about almost any-thing, can introduce themselves to strangers with relative ease, and readily adjust to a wide range of new social situations. In short, they can be de-scribed as social chameleons, capable of adapting their behavior in order to blend comfortably into almost any social context. Social adaptability appears to be relevant to activities performed by entrepreneurs that are crucial to the success of their new ventures. Ability to adapt to, or feel comfortable in, a wide range of social situations. Examples of potential relevance to entrepreneurial success: Establishing business relationships with strangers (i.e., cold calls), and working with people from diverse backgrounds. The research does not suggest that other skills and abilities are unimportant or that one area of skills may be more important than another. It does however support the
idea that the success of individual entrepreneurs is multi-dimensional and that the effectiveness in interacting with others may be one piece to the puzzle and should not be overlooked. The Benefits of Social Skills

Numerous findings and proposals in the literature on entrepreneurship indicate that entrepreneurs’ social skills can influence their success. For example, it has been found that entrepreneurs whose companies are successful engage in more communication with others, and are more effective in this activity, than entrepreneurs whose companies fail. Similarly, such cooperation may increase when the entrepreneur and venture capitalist share a positive social or business relationship. Along the same lines, personal contacts and relationships are often included on lists of the key ingredients in new venture formation. Finally, recent research designed to examine the impact of social skills on entrepreneurs’ success provides clear support for the relationship we suggest. For example, one study conducted with two different groups of entrepreneurs found that two social skills-social adaptability and social perception-were significant predictors of the financial success of founders of high-tech companies and founders of cosmetics distribution organizations.

Many people believe that good entrepreneurs are naturally born, rather than trained or experienced in the art of business. I believe there is a natural born component required. On the natural born side, some entrepreneurs seem to have a strong vision and the ability to inspirationally lead others. Social skills are important for resiliency for a number of reasons. People with good social skills are naturally more popular than their less socially adept peers, which mean they have better supports to call on when experiencing difficulties in their lives. This is why social skill is so important for entrepreneurship.

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