Entrepreneurial behaviour is characterised by starting with available means, thinking in affordable loss, building partnerships early, using surprises, taking initiative, taking calculated risks, high need for achievement, internal locus of control, persistence, tolerance of ambiguity, learning from failure and alertness to opportunities.
How do successful entrepreneurs actually think? In 2001, Saras Sarasvathy, an Indian-born researcher at the University of Virginia, studied expert entrepreneurs, each of whom had founded several companies, and found they reasoned differently from corporate managers. Instead of starting with a goal and finding the means, they started with the means they had (who they were, what they knew, whom they knew) and let goals emerge. She called this effectuation.
Effectuation, together with earlier research on achievement and risk, gives a clear picture of entrepreneurial behaviour. Here are its main characteristics. For personality traits, see the characteristics of an entrepreneur.
12 Characteristics of Entrepreneurial Behaviour
1. Starts With Available Means
Entrepreneurs ask “what can I do with what I have?” rather than waiting for perfect resources (Sarasvathy’s “bird in hand”).
2. Thinks in Affordable Loss
They decide how much they can afford to lose, rather than betting everything on forecast returns.
3. Builds Partnerships Early
They bring in customers, suppliers and partners who commit resources and shape the venture.
4. Uses Surprises
Unexpected events are treated as opportunities rather than threats (the “lemonade” principle).
5. Takes Initiative
They act on opportunities instead of waiting to be told.
6. Takes Calculated Risks
Research from McClelland onwards shows entrepreneurs prefer moderate, manageable risks, not gambles.
7. High Need for Achievement
They set challenging goals and seek feedback on performance.
8. Internal Locus of Control
They believe their actions shape outcomes.
9. Persistence
They keep going through setbacks and rejections.
10. Tolerance of Ambiguity
They can act without complete information.
11. Learns From Failure
Mistakes become lessons rather than reasons to quit.
12. Opportunity Alertness
Israel Kirzner described entrepreneurs as unusually alert to opportunities others overlook.
Causal vs Effectual Thinking
| Point | Causal (manager) | Effectual (entrepreneur) |
|---|---|---|
| Starting point | A set goal | Available means |
| Risk view | Expected return | Affordable loss |
| Others | Competitors to analyse | Partners to bring in |
| Surprises | Avoid them | Use them |
| Future | Predict it | Shape it |
Related: tendencies of entrepreneurial behaviour.
