The Entrepreneurs Random Walk

Abstract

The issues of entrepreneurial ex-ante determination and managerial intent are discussed as applied to the ex-post organizational result. Possible errors in over-attribution of success to the celebrity-entrepreneur and the tendency to disregard the impact of endogenous market conditions, randomness on success due to creative destruction free-market mechanisms are discussed.Humans inherently look for correlation as correlations produce useful knowledge. Specifically, investors seek to create cause-effect knowledge in order to enhance returns. Students and researchers of business also attempt to tie causation to effects. Fundamental attribution error psychology posits a tendency to over-weight personality-based explanations and under-value situational factors when assessing what factors are responsible for the ex-post-facto outcome of an organization. In the field of entrepreneurship, this trait of human psychology may manifest in the tendency to credit the leader him/herself of a successful organization vis-a-vis more important external factors which contributed to success such as the temporal status of market demand conditions.The existence of fundamental attribution error may likewise lead to over-weight emphasis of a leaders input to organizational failure, however, the sample of entrepreneurs linked to successful organizations is self-selected as the unsuccessful entrepreneurs are usually not locatable. Therefore, stakeholders show strong tendencies to link the focus-entrepreneur with a resultant successful enterprise. This tendency is observable in the general culture as most students of entrepreneurship believe the knowledge and actions of Ray Kroc were a prime factor in the economic success of McDonalds. The question explored within the present study is to what extent is such ex-post-facto success attributable to the ex-ante entrepreneurial intent appropriate?Most people familiar with business strongly identify; Steve Jobs with Apple, Thomas Watson with IBM, Dave Thomas with Wendys, Bill Gates with Microsoft, Howard Schultz with Starbucks, Harland Sanders with KFC, and Fred Smith with FedEX. Instructors of entrepreneurship teach with these stories. More importantly, researchers of entrepreneurship use these leaders and their associated knowledge and behavior as independent variables when regressing these variables onto the ex-post dependent outcome of the organization. The investing and finance community also correlate these success story celebrity-entrepreneurs with the resulting rate of return on equity. This paper explores a series of archive-based recollections of the entrepreneurs ex-ante thoughts to demonstrate that many legendary-business entrepreneurs did not expect the organizations extraordinary rates of growth and the ex-post-facto market successes. Hence, cause-effect attribution questions arise.One important research question addressed within is; if the entrepreneur did not know of, or expect growth before the growth, then the resulting growth may not be fully attributed to the person as valid intent. More generally, then to what extent can the resulting organizational success be attributed to the identified behavior of entrepreneurship? Are the successes normally attributed to individual-entrepreneurs really organizational successes or even random-walk phenomenon? Are fundamental attribution errors over-weighing the construct of entrepreneurship and obscuring other, organizational-based, effective causes of economic success?The rise of the media-driven, celebrity-entrepreneur leads to a recent strengthening of attribution of organizational success to that leader. Conclusions within the current study lead to a more distinct focus on the time-limited tasks of entrepreneurship that are very limited in proportional impact to a firms total life-span and resulting economic value. We then can attribute much more of the resulting economic value to the impact of organizational dynamics and organizational development.