How entrepreneurs think: financial decisions for the long or short term

Abstract

PurposeThe purpose of this paper is to suggest that different start-up motivations make entrepreneurs pursue different kinds of new business performance, which in this study are expressed in financial terms (i.e. return on assets). The authors posit that so-called extrinsic motivation urges entrepreneurs to be more short-term oriented, while their intrinsic motivation encourages a longer-term business vision. Additionally, this paper explores how intrinsic and extrinsic entrepreneurship motivations combine and produce financial dilemmas for entrepreneurs.Design/methodology/approachThe analyses are based on 300 entrepreneurs across diverse industries in Belgium. Data was collected for this study through structured interviews with entrepreneurs combined with a company questionnaire. Financial data was obtained through a government database.FindingsResults confirm that extrinsic entrepreneurship motivation boosts new business short-term financial performance, whereas intrinsic motivation contributes to the firm’s longer-term financial returns. This paper also shows that a mix of intrinsic and extrinsic motivations directs entrepreneurs toward different profitability levels during the organization’s survival and early-establishment phase.Originality/valueResearch on entrepreneurship has not yet corroborated that motivations can be personally conflicting, thereby saddling the entrepreneur with dilemmas that may manifest into different levels of business performance.