IJEMR June 2017 - Vol 7 Issue 06 - Online - ISSN 22492585 Print - ISSN 2249-8672

Entrepreneurial Competencies and Contextual Determinants of Successful SME

Business Startups in Bangalore, India
*Dr. Latha Krishnan
*Director&Professor, Dayananda Sagar Institutions MBA-BU , Shjavige Malleshwara Hills,
Kumaraswamy Layout, Bangalore 560 078
Abstract
Research in SME startups has been growing during recent times. Entrepreneurial
competencies have been identified as a specific group of competencies relevant to the exercise
of successful entrepreneurship (Mitchelmore & Rowley, 2010). This chapter examines
primarily the constructs of entrepreneurial competencies and attempts to identify personal
competencies along with a secondary objective to gain an improved understanding of the
context (such as industrial sector, dynamism of market places, customer type etc.) in which
successful startups thrive. While examining the links between the performance of startups
and economic growth, the secret behind entrepreneurial success has been of great fascination
to researchers. The Global Entrepreneurship Monitor (GEM) 2012 stated that a positive
attitude towards entrepreneurship in an economy could indicate the prosperity of people who
engage in this activity. In addition, attitudes can signify the extent to which a society may
provide cultural and financial support to assist the efforts of entrepreneurs. The national level
of entrepreneurial activity has a significant relationship with the subsequent levels of
economic growth. Hence a sample of 250 entrepreneurs of SME startups is chosen from
Bangalore, India for the study. Two analytical scales, entrepreneurial competency scale and
entrepreneurial personality scales will be used to measure their impact on entrepreneurial
success.
The mission of this study is to build entrepreneurial leadership through competency and
personality, knowledge and skills to carry out ideas for personal and professional success with
specific reference to startups in India. Our study confirms that Small and Medium Enterprise
(SME) entrepreneurs need to build competencies to survive and face challenging situations.
Lussiers and Pfeifer (2001) study found that in addition to competencies and personality
traits, human capital of an entrepreneur plays an important role in contributing to
entrepreneurial success. These studies also support our hypothesis. The concerns of this
study are to understand the challenges they face during their entrepreneurial journey.
Key Words: Entrepreneurial Competency, Entrepreneurial Personality, Entrepreneurial
Success, SME Startups.
Introduction
Recent development in research on entrepreneurship have seen increased attention to small
and medium- sized enterprises (SMEs), largely due to the realisation that SMEs play a
significant role in a countrys economy. The collective impact of SMEs on the economy of both
developed and developing countries is considerable. Given that increasing the chances of
success among SMEs would have huge implications for growth and socio-economic well being
of a country (Asia-Pacific Economic Cooperation, 2004), understanding antecedents of success
in SMEs is critical. The creation of more successful SME startups could potentially create
jobs, increase trade, and consequently GDP in the region. Unfortunately, literature on SMEs
shows a lack of consistency with regard to the key factors that determine SME success
(ORegan, 2004). Contrasting views exist, with some scholars attributing success to the
influence of the individual (i.e., the entrepreneur) and others highlighting the importance of
external and environmental factors (such as the state of the economy, government policy,
availability of financial support and infrastructure).
It is noteworthy that, among the limited number of studies that investigate the influence of the
individual characteristics of the entrepreneur on business performance, most adopt a
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personality traits approach (Pearson and Chatterjee, 2001) or include a focus on selected
demographic variables. This approach has been criticized because of the mixed results
generated in the replication studies (Entrialgo, 2000). Given the results of efforts to develop a
model of business success in SMEs, there was a need for more research in this area.
Researchers are in general agreement about the numerous difficulties experienced by SMEs.
In particular, smaller firms have higher failure rate than larger firms (Storey, 1994). They are
also more likely than larger firms to be affected by changes in their internal and external
environments (Man and Lau, 2005). Although it has been difficult to ascertain why, in similar
situations, some entrepreneurs fail while others succeed, it is thought that the focus on
entrepreneurial attitude, entrepreneurial competency and personality offers a practical
means of addressing this phenomenon.
The Research Problem
Developing relevant attitude, competencies and personality among the managing entrepreneur
is considered to be a crucial step in providing an SME with a sustainable competitive
advantage, primarily because this sort of business is critically dependent on the owners
capabilities (SadlerSmith, 2003). According to McGregor and Tweed (2001), the competencies
of the owner-manager in smaller firms can be seen as individual specific and not
organizational indexed as they are with larger firms. This implies that in SMEs, the owners
skills and competencies can be equated with firms competencies thereby allowing a
researcher to focus on individual entrepreneurs as the unit of analysis.
In India, entrepreneurship is definitely of prime importance today. Small Industry
Development Organization (SIDO) marked the beginning of planned development of
entrepreneurship in India. It was also realized that for achieving economic development, it is
inevitable to increase entrepreneurship both quantitatively and qualitatively (Bishth and
Sharma, 1991).
An entrepreneur is an individual who creates a new organization or founds a new venture.
Clearly, the definitions of entrepreneurs range from those that emphasise broad criteria (e.g.
venture creation) to those that emphasise more specific criteria (e.g. novel creation,
management of risks, and persistence in goal attainment). Thus, entrepreneurship, is
evergreen as before, and has been characterized as opportunity recognition; to explore the
entrepreneurial drive among entrepreneurs by bringing together all resources necessary for
success.
Entrepreneurship has acquired a special significance in the control of economic growth and
industrial development in the rapidly changing socio economic and socio cultural climate,
both in the developing and developed countries. The entrepreneur is an economic man, who
tries to maximize his profits by innovation. Innovation involves problem solving and he gets
satisfaction in using his capabilities in solving problems (Gardner, 1988). Schumpeter (1997)
envisioned that an entrepreneur is the agent who provides an economic leadership that
changes the initial conditions of the economy and causes this discontinuous dynamic change.
Hence by nature, he is neither a technician nor financier, but considered as an innovator.
The Global Entrepreneurship Monitor (GEM) 2002 report shows that the national level of
entrepreneurial activity has a significant association with subsequent level of economic
growth. There are no countries with high levels of entrepreneurship and low level of economic
growth (Reynolds et al., 2002). The growth of entrepreneurship in India and its importance
can be gauged by the Global Entrepreneurship Monitor (GEM) 2007 report which states that
an entrepreneurial boom exists in India, where one in every ten is engaged in entrepreneurial
activity. Interestingly, the report also states that, India has the highest level of business (15%)
among GEM nations in 2006. India has nearly three million SMEs, which account for almost
50 percent of industrial output and 42 percent of Indias total exports.

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According to the Economic Survey (2006), this sector contributed over 50 percent of the new
jobs created in the year 2005. Despite their significance, past statistics indicate that three out
of five businesses fail within the first few months of operation (National Bureau of Statistics,
2007). According to Amyx (2005), one of the most significant challenges is the negative
perception towards SMEs. Potential clients perceive small businesses as lacking the ability to
provide quality services and are unable to satisfy more than one critical project
simultaneously. Often larger companies are selected and given business for their clout in the
industry and name recognition alone. Starting and operating a small business includes a
possibility of success as well as failure. Because of their small size, a small management
mistake is likely to lead to sickness and even death of small business; hence there is no
opportunity to learn from mistakes. Entrepreneurial competencies have been identified as a
specific group of competencies relevant to the exercise of successful entrepreneurship
(Mitchelmore& Rowley, 2010). This chapter examines primarily the constructs of
entrepreneurial competencies and attempts to identify personal competencies along with a
secondary objective to gain an improved understanding of the context (such as industrial
sector, dynamism of market places, customer type etc.) in which successful startups thrive.
While examining the links between the performance of startups and economic growth, the
secret behind entrepreneurial success has been of great fascination to researchers. The Global
Entrepreneurship Monitor (GEM) 2012 stated that a positive attitude towards
entrepreneurship in an economy could indicate the prosperity of people who engage in this
activity. In addition, attitudes can signify the extent to which a society may provide cultural
and financial support to assist the efforts of entrepreneurs. The national level of
entrepreneurial activity has a significant relationship with the subsequent levels of economic
growth. E-commerce and online business is also on the rise. While examining the links
between the performance of SMEs and economic growth, the secrets of entrepreneurial
success have continued to be a great fascination to researchers. Hence this study aims to find
out the characteristics of entrepreneurs towards success in SMEs leading to life satisfaction
among this entrepreneur.
Gaps in Literature Addressed
Studies have been done only in organizational context, and not in entrepreneurial
behavioral context
Lack of an integrated institutional framework to explain entrepreneurial competencies and
performance among successful business startup

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Conceptual Model

Figure 1
A review of entrepreneurial competencies saw the competencies of entrepreneurs as having
dual characteristics: first, domain are personalized background (i.e. traits, personality,
attitudes, self image) and second, domain that could be acquired through theoretical or
practical learning (i.e. skills, knowledge, and experience), according to Man and Lau (2005).
The first components are the internalised elements, inherent aspect of an individuals
character and personality, while the latter is often referred to as externalised elements which
could be acquired through learning and training (Muzychenko and Saee, 2004). Therefore,
both competency constructs and personality constructs are studied in order to have a
thorough understanding and insight into entrepreneurial success. According to Man, Lau and
Chan (2002), six main areas of entrepreneurial competencies are identified i.e. opportunity,
relationship, conceptual, learning, strategic, and personal competencies.
Strategic competency involves strategic thinking and reflects on the ability of an entrepreneur
to develop a future vision (Stonehouse and Pemberton, 2002). This directs entrepreneurs to
focus their action and decisions strategically to give their firm a competitive edge over others.
Conceptual competency is related to the ability of an entrepreneur to think out of the box and
to stimulate new ideas and concepts which are exceptional from the normal way of doing
things (Michalko, 2000). Another aspect of entrepreneurial competency is the ability of being
alert when an opportunity arises and to grab it. This competency is associated with the ability
of an entrepreneur to identify, acknowledge and develop market opportunities (Man and Lau,
2005). To be successful in business, an entrepreneur should develop cordial relationships
with his stake holders. Bird (1995) reiterates that in order to successfully secure business
dealings, an entrepreneur should build relationships or forge entrepreneurial bonding, that
reflects establishing and strengthening relationships with the most important stakeholders,
like customers and suppliers, as the company grows. A personal competency, which deals
with the personal qualities and personal rapport, is seen as an important competency which
enhances the effectiveness of an entrepreneur (Man, 2000). These above mentioned
competencies are linked to the performance of SMEs.
Central to the model are the relationship between entrepreneurial competencies construct and
constructs of personality traits, together are responsible for the success of the SMEs. In other
words, by making use of their competencies, an entrepreneur can create more opportunities
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for creativity and sustained growth, and partnering for technological advancement. Much of
the past research on entrepreneurship has been founded upon the premise that entrepreneurs
embody distinctive personality traits which can be identified and used to indicate potential for
entrepreneurship (Carland et al., 1984). Self-efficacy is an individuals belief about his or her
capability to begin and to perform a task successfully. The entrepreneurs inner belief in
himself or herself is that he or she can start a new venture company and can make it a
successful business. According to these theories, major personal attributes that distinguish
entrepreneurs from others include need for achievement, self-efficacy, locus of control,
willingness to bear risk and tolerance for ambiguity (Begley and Boyd, 1987; Brockhaus,
1982; Brockhaus and Horwitz 1986; McClelland, 1961; Shane et al., 2000). The need for
achievement is a drive to excel and achieve a goal to adhere to set standards (Chell et al.,
1991). Individual with high internal locus of control believe they control events and relate to
their need for achievement. People with an internal locus of control believe that they are in
total control of their destiny (Chell et al., 1991). Innovativeness is perhaps the most distinctive
entrepreneurial trait. Another key dimension of the entrepreneurial psyche is risk-taking
propensity. How entrepreneurs perceive and manage risks in their environment, conditions
the success and growth of the business. Risk-taking propensity has also been widely studied
in the past by Brockhaus (1980). Thus an entrepreneur can develop a better entrepreneurial
personality such as the drive to achieve, locus of control, risk taking propensity and
innovativeness. Finally, an entrepreneur can work towards his or her competencies, along
with entrepreneurial personality for entrepreneurial success. This has led to the following
broad-based hypotheses:
Hypothesis 1: The conceptual, relational, learning, strategic, ethical competencies of the
entrepreneur have a direct effect on the entrepreneurial success of an SME.
Hypothesis 2: The strategic and conceptual competencies of the entrepreneur are positively
related to his risk taking propensity.
Hypothesis 3: Entrepreneurial competency has a direct effect on entrepreneurial personality.
Research Methodology
To understand the basis for entrepreneurial success, a sample of two hundred and fifty
entrepreneurs from Small and Medium Enterprises (SMEs) startups from Karnataka Small
Scale Industries Association (KASSIA), Peenya Industrial Association (PIA) and Federation of
Karnataka Chambers of Commerce and Industry (FKCCI) was chosen for the study. A
preliminary study of thirty five entrepreneurs was conducted to assist the development of the
main survey instrument. The purpose of the pilot study was to identify the most appropriate
instrument and items that represent the constructs and to test the efficacy and the reliability
of the questionnaire considered for the analysis. The main survey, with 250 respondents from
selected districts of Karnataka was collected on the basis of the pilot survey. A questionnaire
was adopted as an instrument to collect the data. Closed ended questionnaire with nominal
and interval scales were used to get suitable responses from the targeted sample. A categorical
scale was used to capture the demographics of the respondents, and interval scale was used
for the measurement of variables deployed in the study. Purposive sampling technique was
used in this research study. Snowball sampling technique was also used to strengthen
relationships with entrepreneurs at every stage of data collection. In both phases of the
research survey, the questionnaire was handed over in person.
Survey Instrument
In order to measure entrepreneurial competencies, a measure of entrepreneurial competency
developed by Man (2000) and further extended by Ahmad et al. (2006) was employed. The
constructs include Conceptual, Strategic, Relational, Opportunity, Learning, Personal skills,
Social responsibility, Ethical and Familism which were used to test the hypotheses. The
internal consistencies reported were above 0.70. With regard to entrepreneurial personality;
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the constructs of risk taking propensity, need for achievement, locus of control and
innovativeness were assessed using the personality scale by Muellor and Thomas (2000). The
internal consistency reported was 0.77. Regarding entrepreneurial success; the constructs of
profitability, sales, return on investment and employment generation was assessed using the
scales of Chandler and Hanks (1994). The internal consistency reported was 0.70. A five-point
Likert scale was used to describe this comparison with 1 representing strongly disagree and 5
representing strongly agree.
Instrument Validation
When the survey was completed, the data was organized and the statistical software SPSS was
used to test the internal consistency of the items in the survey. Construct validity was
determined using factor analysis procedure. Principal component factor analysis was
performed on all the indicators for all the constructs in the study. Factor analysis was done
for all the items that showed a higher factor loading. In order to ascertain the internal
consistency of the constructs, Cronbachs alpha was computed for each factor, with a value of
>0.60 considered to be acceptable and a value of >0. 70 considered to be good (Nunnally and
Bernstein, 1994). The Cronbachs alpha value for all competency constructs was found to be
good (i.e. above 0.70). Reliability co-efficient for all constructs, as per personality scales, were
found to be reliable as Cronbachs alpha ranged from 0.65 to 0.74.
The Entrepreneurial success consisted of five items and the internal consistency of the
constructs was adequate with alpha co-efficient exceeding 0.61.
Data Analysis and Results
Factor analysis were conducted to determine the number of factors in every competency
constructs and personality sub-constructs to give goodness of fit, together with reliability and
correlation analyses was conducted. It was found that all factors have an Eigen value above 1,
ranging from 1.89 to 5.93. Cumulative variance aggregated from 49% to 76%.
A Confirmatory factor analysis was run for each of the three scales on all the dimension of
entrepreneurial competencies, personality and entrepreneurial success. CFA contains
inferential statistics that allows for a stricter and more objective interpretation of validity
(Anderson and Gerbing, 1988). More specifically, unidimensionality, convergent and
discriminant validity tests can be used. Goodness of fit for the model is given in Table 1.

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Table: 1.
Goodness of fit statistics for the model of Entrepreneurial competency and personality
constructs
Competency and 2 NFI GFI CFI RMSEA
Personality
Constructs
Conceptual 10.96 0.96 0.99 0.98 0.059
Strategic 9.09 0.97 0.98 0.94 0.047
Relational 7.36 0.96 0.98 0.96 0.042
Opportunity 7.34 0.97 0.97 0.98 0.034
Learning 7.87 0.98 0.99 0.98 0.052
Personal 11.64 0.98 0.99 0.97 0.039
Ethical 13.56 0.98 0.99 0.99 0.034
Social 12.79 0.97 0.99 0.93 0.043
Responsibility
Risk 13.97 0.99 0.97 0.95 0.048
Need for 4.87 0.94 0.96 0.94 0.042
Achievement
Locus of control 4.69 0.96 0.99 0.98 0.048
Innovation 2.69 0.97 0.94 0.96 0.034
Source: Primary Data
As can be seen from Table 1 that the overall goodness of fit indices established for the latent
factors of entrepreneurial competency and personality reflect a good fit of the model given in
the data. Given the results of the reliability and goodness of fit, it was concluded that all the
dimensions of entrepreneurial competency and personality were suitable for use in the model
testing.

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Table: 2
Descriptive Statistics, Reliability Coefficients and Correlation
Descriptive Statistics and Zero order correlation of all constructs for SME Data
Constructs 1 2 3 4 5 6 7 8 9 10 11 12 13
-
Conceptual
Strategic .62** -
Relational .72** .70* -
*
Opportunit .75** .66* .71** -
y *
Learning .76** .74* .65** .67* -
* *
Personal .63** .67* .72** .71* .82* -
* * *
Ethical .64** .62* .69** .65* .59* .73** -
* * *
Social .70** .69* .60** .81* .83* .68** .49** -
* * *
Responsibil
ity
Familism .85** .87* .65** .63* .71* .52** .69** .65** -
* * *
Risk .42** .53* .34** .68* .49* .63** .41** .42** .32** -
* * *
Need for .76** .72* .63** .65* .68* .60** .42** .32** .41** .21** -
* * *
Achievemen
t
Locus of .69** .51* 56** .59* .68* .62** .42** .59** .62** .41** .58* -
control * * * *
Innovation .66** .63* .55** .44* .77* .54** .55** .57** .67** .36** .38* .51* -
* * * * *
Mean 6.04 5.92 5.97 5.98 6.18 6.09 5.51 5.74 5.49 5.60 3.72 3.37 2.51
SD .72 .75 .77 .68 .70 .73 1.07 .90 .98 .89 .74 .79 .83

Note. **Correlation is significant at p<.01

The inter correlation analysis between entrepreneurial competency and personality were also
examined separately for SME data. It was clear from Table 2 that almost all competency areas
and personality traits were strongly correlated (r>.50, p<.01) except for risk which had a
moderate relationship with conceptual skill (r= .42, p<.01), relational (r=.34, p<.01), social
responsibility (r=.41, p<.01) and familism (r=.42, p=<.01).

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Hypotheses Testing Using Structural Equation Model (SEM)

In testing the hypotheses developed for this study, Structural Equation Modeling (SEM) was
used. SEM takes into account the measurement error in the observed variables, resulting in a
more accurate estimation of the model. SEM allows for the testing of an entire model
simultaneously instead of testing each bivariate relationship in a step-by-step fashion
(Shumaker and Lomax, 1996). SEM therefore offers greater precision in model estimation.
Analysis of Moment Structures (AMOS) version 16 was run to analyze the data by using
Structural Equation Modelling (SEM). AMOS graphics were used to graphically assess the
model fit for all parameter estimates, sample means, variances, co-variances and correlation
(Stine, 1989). Hypotheses testing for multiple models like entrepreneurial personality,
entrepreneurial competencies, entrepreneurial success and their direct effect and relationship,
was assessed using SEM in this study. Properties were analyzed with standardized estimates,
minimization, residual moment and modification indices. Standardized estimates displayed
estimates of co-variance between the observed variables. Correlation estimates were derived
after the relevant variances and co-variances have been estimated. Seven measures of fit:
2 2
, /d f , Goodness of fit (GFI), Absolute fit (AGFI), Incremental fit (IFI), Tucker-Lewis Index
(TLI), and Root Mean-Square Error of Approximation (RMSEA) were explicitly estimated in the
model specified.
Hypothesis 1: The conceptual, relational, learning, strategic and ethical competencies
of the entrepreneur have a direct effect on the entrepreneurial success of an SME.
Figure 2
Structural Model: Entrepreneurial competency and entrepreneurial success

Note: Stra=Strategic, Opp= Opportunity, Lear= Learning, Fam= Familism, ROI= Return on
investment
As depicted in the Figure 2, the analysis of data using SEM procedure showed a significant
direct relationship of entrepreneurial competencies like conceptual skill, strategic skill,
opportunity skill, learning skill and familism; and entrepreneurial success in terms of sales,
profit, return on investment and employment. This model yielded a moderate fit of
2 2
= 117.0, p =0.000, /df = 2.00, GFI is .746, AGFI is .922, IFI is .878 and RMSEA is.0514.
The result therefore, supported the hypothesized relationship.

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This finding is consistent with the study undertaken by Thompson (1999), who opined that an
entrepreneur with conceptual skill is more creative, innovative and flexible in dealing with
opportunities, risks and uncertainties and thus make a difference in his entrepreneurial
venture and success. Parnell, Lester, and Menefee (2000) also confirm that strategic skills
bridge the gap between firms resources and capabilities to gain competitive advantage to
overcome uncertainty. Both these studies show a positive correlation between competency and
entrepreneurial success. In Study on Malaysian SMEs, Noor Hazlima Ahmad (2009) confirms
that a higher level of entrepreneurial competencies (i.e. Strategic, Conceptual, relational,
learning familism and ethical) is associated with greater business success among SMEs in
Malaysia. All these studies support our hypothesis.
Hypothesis 2: The strategic and conceptual competencies of the entrepreneur are
positively related to his risk taking propensity.
Figure 3.-

Structural Model: Conceptual, strategic competency and risk

As depicted in Figure 3, analysis of data using SEM procedure showed a significant direct
relationship of entrepreneurial competencies like conceptual skill, strategic skill and
entrepreneurial personality like risk taking propensity. This model yielded a model fit of
2 2
= 44.4, p =0.033, /df = 2.00, GFI is .968, AGFI is .949, IFI is .954, TLI is .924 and RMSEA
is .066. The result therefore, supported the hypothesized relationship.
Risk taking is an essential characteristic for entrepreneurial success. Mill (1984) confirms that
risk taking is a key factor in distinguishing entrepreneurs from non entrepreneurs. The
entrepreneurs risk taking ability is moderate and calculated according to (Kent et al., 1982).
Other results are split, entrepreneurs who have the ability to control their actions (internal
locus of control) are less risk takers, when compared to entrepreneurs who believe that they
cannot exercise control over events (external locus of control) (McClelland, 1961; Chell et al.,
1991). These studies support our hypothesis. Some researchers have cast a doubt on risk
taking propensity as an entrepreneurial personality. In particular, Brockhaus (1982) found no
significant statistical variation in the general risk taking patterns of a set of entrepreneurs and
a set of managers. But in our studies, there is a significant direct relationship between
competencies and risk taking propensity. It is believed that entrepreneurs take a greater
degree of risk, especially in areas where they have control and exhibit competencies in
realizing profit.

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Hypothesis 3: Entrepreneurial competency has a direct effect on entrepreneurial

personality.
Figure-4 Structural Model: Entrepreneurial Competencies and Entrepreneurial personality

Note: EC= Entrepreneurial competency, EP= Entrepreneurial personality, Conc= Conceptual,

Stra- Strategic, N.Ach= Need for achievement, Risk= Risk taking propensity
As depicted in figure 4, analysis of data using SEM procedure showed a significant direct
relationship of entrepreneurial competencies like conceptual skill and strategic skill; and
entrepreneurial personality constructs like risk and need for achievement. This model yielded
2 2
a model fit of = 144.50, p =0.000, /df = 2.10, GFI = .968, AGFI = .949, IFI = .954 CFI
=.943 and RMSEA is 0.051. The result therefore, supported the hypothesized relationship.
McClelland (1961) asserts that people who have high need for achievement possess certain
critical attributes/ characteristics. High achievers take responsibilities to control situations
and find workable solutions to their problems (Sexton and Smilor, 1986). High achievers avoid
both very easy and very difficult tasks (Chell et al., 1991). McClelland (1961) concludes that a
high need for achievement drives people to become successful entrepreneurs. The above
studies confirm our findings.
This finding is consistent with the study undertaken by Begley and Bond (1987), who found
that entrepreneurs scored significantly more as they are more innovative than non
entrepreneurs and their need for achievement is greater and risk taking propensity is also
higher. Brochaus (1982) reviewed a number of psychological characteristics and concluded
that need for achievement, locus of control and risk taking propensity are attributes
contributing to entrepreneurial success in a new business start up. Brochaus and Horwitzs
(1986) empirical findings affirmed that entrepreneurs with internal locus of control i.e. having
control over their actions strive for high need for achievement. Innovativeness is the focal
point for entrepreneurship and an essential entrepreneurial characteristic. Our study
confirms that SME entrepreneurs need to build competencies to survive and face challenging
situations. Lussiers and Pfeifer (2001) study found that in addition to competencies and
personality traits, human capital of an entrepreneur plays an important role in contributing to
entrepreneurial success. These studies also support our hypothesis.
Discussion
The purpose of the study was to ascertain whether entrepreneurial competencies and
entrepreneurial personality influenced business success. The findings confirmed the
relationship, in the context studied. The results were in consonance with the observations of
Weserberg et al. (1997), who emphasized the critical role of business owners in acquiring and
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developing knowledge, skills and abilities that influence a firms success. In respect of SME
startups, the firms competencies actually refer to the capability of the entrepreneurs in
exploiting resources for business goals. Thus a direct link was found between competencies,
personality and growth, leading to entrepreneurial success. This confirmed the observation of
Gibb (2005), that in SMEs, competitive advantage is achieved and sustained through the
ability of the entrepreneur, despite constraints associated with the firms size. Though
entrepreneurial success in small businesses depends on many variables, like management
and business skills, family background and experience, it was found that certain personality
characteristics contributed largely to entrepreneurial success.
Respondent entrepreneurs generally agreed that while competencies, personality and attitudes
were to a large extent personalised, these attributes could be increased or reoriented towards
achievement. The accelerating drive towards this end was motivation, which was found among
small and medium businessmen in Karnataka.
Another key dimension of the entrepreneurial psyche is risk-taking propensity. It is essential
for the success and growth of a business, and how entrepreneurs perceive and handle risks in
their setting and business ventures, influences its success. Risk taking, whether financial, or
else, is a distinctive trait of an entrepreneur. Early writers such as McClelland (1961) opined
that even entrepreneurs with a high need for achievement often prefer reasonable levels of
risks. In fact, some of the entrepreneurs interviewed were of the opinion that risk taking is
inevitable and they had to take calculated risks in order to be successful, without being rash
or hasty in their decision making. It was also observed that many respondents took up
entrepreneurship when they experienced stress factors, which acted as precipitators, e.g. loss
of job, sudden calamity, desertion, separation or death of spouse. This lead them to do
something to augment their incomes and get a sense of recognition and well being.
The results showed that most of the active entrepreneurs were in the age group of 28 to 50
years. This finding is corroborated by Reynolds et al. (2002) who found that individuals
ranging from 25 to 44 years were most entrepreneurially active. Sinha (1996) opined that
successful entrepreneurs were relatively younger in age. He found a significant correlation
between age of an entrepreneur and business success (25 to 40 years). Various studies have
endorsed that identifying opportunity; recognition of talent and development are the heart of
entrepreneurial activities (de Koning, 2003). Successful entrepreneurs possess a high level of
confidence and have a tremendous personal vigor and drive, and the capacity to work
extended hours (Timmons, 1978). They also possess a high level of determination and desire
to overcome hurdles, resolve issues, continue with the same zeal and enthusiasm to pursue
their goals; which are quite often high and challenging, yet realistic and achievable. This was
corroborated in our study. It is therefore, predicted that personal competency and personality
would enhance the effectiveness of entrepreneurs in performing all roles that have a positive
impact on entrepreneurial success.
Conclusion
From this study, it is evident that a thorough comprehension about the goal of entrepreneurial
success, through the twin paths of entrepreneurial competencies and personality, is of vital
concern since it provides entrepreneurs in SME startups with a road map and the know-how
of their existing skills and behaviour. Their personal traits of innovativeness and risk-taking
propensity condition their level of performance. It is clear that entrepreneurs in SMEs
undertake complex tasks in running successful business ventures. This complexity and
prevailing uncertain business environments necessitates them to prepare themselves with the
appropriate attitudes, competencies and personality. This study has conclusively shown that
entrepreneurial competencies and personality are critical components for success in SMEs.

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Limitations and Directions for Future Research

Classifying the entrepreneurs in SME startups based on the type of business is not within the
scope of this study. Such an analysis would have shown more interesting results. To
understand more about the findings of this research, a detailed study on each one of the SME
entrepreneurs entrepreneurial traits and the reasons underlying them can be taken up using
a case study approach. This research study could also be replicated and refined in other
research contexts covering SMEs of other states.
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Notes:
1. Small Enterprise are those engaged in the manufacture of goods and whose investment in
plant and machinery does not exceed Rs. 5 crore.
2. Medium Enterprises are those Enterprise engaged in the manufacture of goods and whose
investment is more than Rs. 5 crore but does not exceed Rs. 10 crore.

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