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THE ENTREPRENEUR AND HIS FIRM: AN EXPLORATORY STUDY

 

TO EXAMINE THE RELATIONSHIP BETWEEN ENTREPRENEURIAL
TYPES AND THE INITIATION, MAINTENANCE AND

AGGRANDIZEMENT OF THEIR COMPANIES

BY

Norman Raymond Smith

AN ABSTRACT

of a Thesis submitted to the School for Advanced Graduate
Studies of Michigan State University in partial
fulfillment of the requirement
for the degree of

DOCTOR OF PHILOSOPHY

Department of Marketing and Transportation Administration

1965

Norman Raymond Smith

ABSTRACT
This is an exploratory study of the relationship between the
entrepreneur and the company he creates and builds. The focus of

this study is: What is the relationship between the type of entre-

 

preneur (that is, the character of the man) and the type of firm he

 

builds and the growth of this firm.

 

One hundred and fifty interviews were conducted with the owners
of manufacturing firms in Michigan. Only those firms that had been
initiated since World War II were included in the sample.

In analyzing the completed interviews the method followed was
to construct ideal types of entrepreneurs and ideal types of companies.
First the interviews were analyzed for the purpose of deciding the
apprOpriate criteria on which to construct types of entrepreneurs.
The attributes (empirical uniformities of the class) held to be most
crucial with respect to the relations hip between the entrepreneur
and his organization concern three major areas: first, how he
deveIOps the internal organization essential to the accomplishment
of his goals; second, how he relates his company to the external
business environment; and third, how he involves his company
and himself with his external social environment, Specifically with

the local community in which he and his company reside.

Norman Raymond Smith

Two types of entrepreneurs were constructed, Craftsman-
Entrepreneur and Opportunistic-Entrepreneur. They are defined
as polar types representing extreme parameters of behavior and
orientation for the entrepreneurs in the sample. It was found that
the C-E exhibits narrowness in education and training, low. social
awareness and low social involvement, lack of flexibility in dealing

with the social environment, and a limited or circumscribed time

I
v
”I

V
orientation. In contrast, the 0-H) exhibits breadth in education and

training, high social awareness and high social involvement, high
confidence in his ability to deal with his social environment, and
an awareness and orientation to the future.

Next, firms are identified on the basis of their behavior in
the economic environment. A comparison is made of the character
of the company at its initiation phase and then again at the time of
the interview. On the basis of selected criteria it was determined
whether the company character had changed substantially or was
relatively unchanged. These firms were then placed on a continuum
on the basis of the criteria. The two polar types of firms (at the
extreme ends of the continuum) are termed the Rigid Firm and the

Adaptive Firm.

Norman Raymond Smith

On the basis of the selected criteria a negative or positive
score was assigned to each entrepreneur and to each firm. The
entrepreneur and his firm were then plotted on a plane with the
horizontal axis showing the scores of the men and the vertical axis,
the scores of the firm. The polar types of men whose companies
were also polar types of firms were then extracted and the growth
in sales of each group compared. <It was found that the O-E
Adaptive firm group had obtained average sales of twelve times
that of the C-E Rigid firm group)?

From this study three hypotheses were evoked. First, there
are at least two types of entrepreneurs which can be differentiated
on the basis of their orientation and characteristic behavior patterns.
These are polar types termed Craftsman-Entrepreneur and
Opportunistic-Entrepreneur. Second, the character of the
organization will reflect the orientation of the entrepreneurial
type associated with it. Third, the Adaptable Firm that has
associated with it an O-E will show a higher growth rate in terms

of sales than the Rigid Firm that has associated with it the C-E.

Copyright by
NORMAN B. SMITH
1965

THE ENTREPRENEUR AND HIS FIRM: AN EXPLORATORY STUDY

 

TO EXAMINE THE RELATIONSHIP BETWEEN ENTREPRENEURIAL
TYPES AND THE 'INITIATION, MAINTENANCE AND

AGGRANDIZEMENT OF THEIR COMPANIES

Norman Raymond Smith

A THESIS

Submitted to the School of Advanced Graduate Studies
of Michigan State University in Partial
Fulfillment of the Requirements
for the Degree of

DOCTOR OF PHILOSOPHY

Department of Marketing and Tran3portation Administration

1965

TABLE OF CONTENTS

Chapter Page
I STATEMENT OF THE PROBLEM ......... 1
Approach to Problem ........... . . . 7

Limitations of the Study ...... . ...... . 8

II RESEARCH PROCEDURES ............. 10
Sample ...................... 10

Exploration Study . .............. 12

Analytical Method: Constructing Ideal Types . . 14

III THE CONSTRUCTED CRAFTSMAN-ENTREPRENEUR

TYPE. . . . . . . .................. 23
Introduction .................... 23
A. Life History and Career Patterns ...... 26

1. Family Background and Role-Models . . 26

2. Education. . . _. ............. Z7
3. Work Experience ............ 29
a) Success Theme ........... 29
b) Becoming a Mechanical Genius . . . 30
c) A Marginal Man ........... 32

(l) Identifies with Management?. . 32,
(2) Identifies with Union? . . . . . 32

4. Circumstances of Initiation ....... 34

B. Characteristic Patterns of Social and
Business Behavior .............. 37

1. Internal Organization .......... 38

TABLE OF CONTENTS-continued

Chapter Page
a) Paternalistic in Employee Relations 38
b) Planning and Delegation . . . . . . . 42
c) Hiring Personnel. . . . . . . . . . . 43

2. Relations hip to External Economic

Environment............... 45
a) Capital Suppliers . . . . ..... 45
b) Marketing and Selling Strategies . . . 46
c) Limited Communication Ability. . . . 48
d) Competitive Strategies ........ 49
e) Plans for Future Growth ....... 52

3. Relations hip to External Social Environ-
ment................... 55

4. Summary and Extraction of the Craftsman-
Entrepreneur Characteristic Orientation 58

IV THE CONSTRUCTED OPPORTUNISTIC-

ENTREPRENEUR TYPE ............... 60
Introduction .................... 60
A. Life History and Career Patterns ...... 61

1. 'Family Background and Role-Models . . 61
. Education . . . . ............. 62
3. Work Experience ............. 65
a) Success and Variety . . . . . . . . . 65
b) Becoming a Chief Executive ..... 68
c) Identifies with Management ..... 75
(1) Summary . . . ............ 76

4. Circumstances of Initiation: The Early
Dream . . . . . ............. 77

TABLE OF CONTENTS-continued

Chapter Page
B. Characteristic Patterns of Social and

Business Behavior . . . . . ...... . . . 82

1. Internal Organization . . . . . . . . . . 83

a) Relationship to Employees . . . . . 83
b) Employee Hiring Criteria. . . . . . 85
c) Planning and Delegation . ..... 86

2. Relationship to External Economic

Environment . ..... . ..... . . . 88
a) Capital Suppliers . . . . ...... 88
b) Marketing and Selling Strategies . . 90
c) Communication Ability ....... 97
d) Basis of Competition ........ 98
e) Plans for Future Growth ...... 101

3. Relationship to External Social
Environment ............... 10 6

C. Summary and Extraction of the Opportunistic-
Entrepreneur Characteristic Orientations . 109 /

V EMPIRICAL DEVIATIONS FROM THE CONSTRUCTED
IDEAL-TYPES OF ENTREPRENEURS . . . . . . . 111

Substruction of the Type to the Attribute Sphere

from Which it is Drawn ............... 111
Working Definitions ................ 111
Analyzing the Cases . . . ............. 118

VI DYNAMICS OF COMPANY CHARACTERISTICS . . 128

Constructing Types of Firms ........... 128
Criteria Chosen for Classifying Firms ...... 129
Working Definitions of the Elements Making up

the Company Characteristics . .......... 136
An Examination of the -4 Firms .......... 140

An Examination of the +4 Firms .......... 146

TABLE OF CONTENTS - continued

Chapter Page
VII THE MAN AND HIS FIRM: THE LOGIC OF FIT . . 152

A Comparison of Growth Between the C-E--

Rigid Firm and the O-E--Adaptab1e Firm . . . . 155

VIII CONCLUSIONS AND IMPLICATIONS FOR
FURTHER STUDY ........ . . . ....... 160
Hypotheses Derived From This Study . . . . . . 1 165

Implications . . . . . ............. . . 169

Table

10.

11.

LIST OF TABLES

Page
Analysis of the Entrepreneurs ......... . . . . 120
Distribution of Entrepreneurial Types . . . . . . . . . 124
Grouping of Entrepreneurial Types . . . . . . . . . . 126
AnalysisoftheFirms_,_................ 141
Distribution of Types of Firms . ..... . ..... 143
Grouping the Types of Firms . . ........... 151
The Entrepreneurial Types and the Firm Types
Plotted on a Rectangular Coordinate System ..... 154
Gross Sales of Selected Firms ............ 158
Sales Comparison of Selected Firms ..... . . . . 159
Complexity of the Entrepreneurial Role Structure
Related to the Developmental Phases of the Firm . . 173
Level of Judgment in Economic Decisions Related to

the DeveIOpmental Phases of the Firm ........ 176

CHAPTER I
STATEMENT OF THE PROBLEM

This is a study of the relationship between the entrepreneur
and the company he creates and builds. It is concerned with the
types of entrepreneurs and the types of companies they build and
their subsequent growth patterns.

Although we cannot prove that the man determines the type
of company and the growth pattern of the company, we shall identi-
fy different types of entrepreneurs and different types of companies.
(Many writers assume that entrepreneurs are a homogeneous group
and when the term entrepreneur is used it refers to only one type

of individual.) The problem focus of this study is: What is the

 

relationship between the type of entrepreneur (that is, the character

 

In a sense this problem of causality is similar to the one in
studies of leadership where a contrast is made between the situational
leader versus the great-man theory. Some investigators in small-
group research have concluded that, "In general, the great man
principle ‘of group composition appears to have much to recommend
it. " See Edgar F. Borgatta, Robert F. Bales and Arthur S. Couch,
”Some Findings Relevant to the Great Man Theory of Leadership, "
Personality and Social Systems, Smelser & Smelser, editors (NeW' ,
York: John Wiley 8: Sons, 1963).

of the man) and the type of firm he builds and the growth of this firm. 2

This is a case study rather than a statistical analysis3 of entre-
preneurial business behavior. It is an exploratory study and as such
has as its substantive aim to 1) identify types of entrepreneurs, 2)
identify types of firms, 3) examine how the type of entrepreneur and
the type of firm fit together logically, and 4) evoke hypotheses for
more systematic study of entrepreneurial types and their modus
operandi in building a type of firm which reflects the entrepreneur's
orientation.

In order to approach the above problem, a number of concepts

have been utilized. The first of these is entrepreneur. In the social

 

2This problem is parallel to that posed by Cole in his book,
Business Enterprise in its Social Settilig (Harvard University Press,
1959). He says, "In the third place, we must be concerned with the
manifold relationships of the rest of a given society with the entre-
preneurial segment, and with the changes in these relationships through
time. These connections pertain to the motivations, the modes of
conduct, and the effectiveness of entrepreneurs - the why, the how.
and the how-well of their actions. And the connections take one into
religious, educational. political, and other phases of life in the given
societies. " (p. 98).

3Therefore, our tables are heuristic rather than demonstrative
in character, or as put very succinctly by Merton in discussing the
limitations of his influentials' study: "Although figures summarizing
our case-study materials are cited from time to time, these are
merely heuristic, not demonstrative, in character. They serve only
to indicate the sources of interpretative hypotheses which await detailed,
systematic inquiry. " Social Theory and Social Structure (Glencoe, 111.:
. Free Press, 1957), p. 387.

sciences, including economics, the term "entrepreneur" has been
used, abused and misused for some three hundred years. Economic
historian, Fritz Redlich, 4 indicates that the term was first used in
a dictionary of commerce written in 1723 by Savary. At that time,
the term, entrepreneur, was defined as the individual who purchased
goods or economic utilities for fixed prices when he did not know at
what price he could sell these items.

Many other writers have examined the various usages of this
term in modern times. 5 The term entrepreneur has been used by
many economists to denote the risk bearer and in many cases has
been abstracted to the point where the flesh and blood aretaken out of
the concept. The risk-bearing is looked upon as a function of business
and not necessarily as the function and activity of an individual and the

assumption is made that the entrepreneur is the firm.

 

4Fritz Redlich, "The Origin of the Concepts of Entrepreneur
and Creative Entrepreneur, " Explorations in Entrepreneurial History,
I, No. 2 (Harvard University Research Center in Entrepreneurial
History, 1949), pp. 1-7.

 

For various theories and definitions of entrepreneur see Bert

F. Hoselitz, "The Early History of Entrepreneurial Theory, " Ex lor-
ations in Entrepreneurial History, 111 (Harvard University Research
Center in Entrepreneurial History, 1951), pp. 193-220.

K. W. Bigelow, "The Development of the Entrepreneurial Concept
to 1850. " (Harvard Ph. D. Thesis, 1929).

6J. H. Stauss, "The Entrepreneur: The Firm," Journal of
Political Economy, L11 (1944), 112-27.

 

 

Schumpeter uses the term entrepreneur primarily to denote
the function or activity of innovation. Many writers and scholars
accepted this definition and followed this line of thought so strongly
that entrepreneur has come to mean an innovator who is creative in
the sense of doing something new and untried. In much of the pepular
literature, the term entrepreneur denotes someone creative, daring,
aggressive and willing to take many chances. The term takes on
connotations of the cultural hero. It is associated with the "rags to
riches" theme, the "log cabin to the White House, ." the ”Horatio Alger
Myth. "7 Also, it can have connotations of being on the margin of dis-
honesty or sharp trading: "Let the buyer beware. "

The foregoing definitions of an entrepreneur do not reveal much
about the individual who starts a new business. A school of thought
which seems to focus more directly on the entrepreneur as a man
and his orientations and behavior is represented by the economic
historian Arthur H. Cole. He questions both Knight and Schumpeter
in their use of the term entrepreneur. He holds that entrepreneurship

n n

is characterized by an individual who "initiates, n maintains, " and

"aggrandizes" a social institution which produces economic goods

 

For an interesting analysis of the develOpment of the Horatio
Alger Myth see R. Richard Wohl, "The Rags to Riches Story: An
Episode of Secular Idealism, ” in Class, Status 8: Power, Reinhard
Bendix & Seymour Lipset, editors (Glencoe, 111.: Free Press, 1953),
388-95.

 

and has, as its manifest goal, profit making. 8 This approach allows
a more fruitful study and analysis of the very important job of starting,
maintaining or aggrandizing a business organization. It avoids the
problem of what an innovation is and of defining what is really new.
In addition, it moves out of the realm of looking at risk-bearing
behavior as the major focus of research. It considers the individual
who starts a business and what is required of him to maintain success-
ful Operation of this business and to make the business grow.

Following Cole's definition, this study employs the following

as its definition of an entrepreneur: The entrepreneur is the individual

 

8In Arthur H. Cole's detailed definition he says: "Entrepreneur-
ship may be defined as the purposeful activity (including an integrated
sequence of decisions) of an individual or group of associated individuals,
undertaken to initiate, maintain, or aggrandize a profit-oriented busi-
ness unit for the production or distribution of economic goods and
services with pecuniary or other advantage the goal or measure of
success, in interaction with (or within the conditions established by)
the internal situation of the unit itself or with the economic, political,
and social circumstances (institutions and practices) of a period which
allows an appreciable measure of freedom of decision. " "Entrepreneur-
ship and Entrepreneurial History: The Institutional Setting, " Change
and the Entrepreneur, Prepared by the Research Center in Entrepre-
neurial History (Cambridge, Mass.: Harvard University Press, 1949).
p. 88.

In this paper he goes on to discuss in detail the various parts of
the definition such as "purposeful activity, " "integrated sequence of
decision, " etc. In a subsequent book (Cole, Business Enterprise in
its Social Settifl, Cambridge, Mass.: Harvard University Press,
1959) he broadens his discussion to consider further ramifications of
his definition. However for our purposes the rather simplified version
will suffice.

 

 

who is primarily responsible for gathering together the necessary
resources to initiate and/ or maintain a business. Aggrandizement
can be a part of the entrepreneurial function, but obviously it comes
later in time. Also, the writer does not feel that because an entre-
preneur does not reach the stage of aggrandizement he is any less
an entrepreneur. Rather, it may be that he represents a different
type of entrepreneur. If an individual initiates a business but is

not able to maintain it, he is still an entrepreneur, albeit an unsuccess-
ful one. The crucial point of definition of an entrepreneur revolves
around the act or series of acts essential to the creation and birth
of a firm.

Many difficult problems are inherent in amassing the necessary
resources to successfully start a firm. The man who successfully
initiates a firm is an entrepreneur. To go further and analyze how
long this firm lives takes us out of the field of merely defining an
entrepreneur and into the area of further classifying the entrepreneurs

and their firms.

 

9In a study at the end of World War II, Oxenfeldt limits his
study of entrepreneurs and their firms to those less than one-year
old. He says: "The term 'entrepreneur' is used throughout this
book to denote an individual active in the direction of a business in
which he owns equity, providing such business is less than one-year
old.............................

The definition employed here departs from common usage in
that it excludes owners of businesses that are over one-year old.

In addition to the concept Of entrepreneur, this analysis will

use a number Of concepts from the social sciences.

Approach to the Problem

 

In analyzing the completed interviews the method followed was
to construct ideal types Of entrepreneurs and ideal types Of companies.1
First the interviews were analyzed for the purpose Of deciding the
apprOpriate criteria on which to construct types Of entrepreneurs.

Two types Of entrepreneurs emerged from this analysis. Using these

 

Active proprietors of concerns more than one-year old are referred
to as owners. The distinction is intended to emphasize the sharp
contrast between the risks and activities Of persons who initiate
businesses and Of owners Of concerns which have Operated for a

long time. Of course, the use Of one year as the dividing line is
purely arbitrary. Nevertheless, mostof the risks and challenging
decisions are faced during the first few months of a firm's existence.
By the end of that period, the trade, scale of Operations, marketing
strategy, legal forms of organization, suppliers, and distributive
channels have generally been determined. The basic decisions with
regard to these matters largely determine the subsequent develOpment
of an enterprise; entrepreneural decisions made after the first year
are to a considerable extent governed by the decisions made during
the first year. Moreover, the personality and administrative qualities
required for successful direction of a new firm are probably quite
different from those needed tO make a success of an Operating firm. ”
Alfred R. Oxenfeldt, New Firms and Free Enterprise (Washington,

D. C.: The American Council on Public Affairs, 1943), p. 75.

 

0These will be defined throughout the study when used in analysis.
In light of the type Of study, this method is chosen because it is felt that
the apprOpriateness and usefulness Of the concepts will be more evident
if defined as they appear in the text.
11A detailed explanation of ideal typology construction will be
made in Chapter II.

constructed types. and setting up Operational criteria, all Of the cases
were examined and the various individual entrepreneurs plotted on
a continuum.

Next, firms were identified on the basis Of their behavior in
the economic environment. A comparison was made Of the character
Of the company at its initiation phase and then again at the time Of
the interview. On the basis Of selected criteria it was determined
whether the company character had changed substantially or was
relatively unchanged. These firms were then placed on a continuum
on the basis Of the criteria.

Finally, the man and the firm were examined to see how much
agreement there was between the two. That is, did the entrepreneur
who most closely approximated one type deveIOp a firm which seemed
appropriate to his type? Then these firms and entrepreneurs which
showed the closest fit were grouped together and the growth Of sales

Of the two groups were contrasted.

Limitations Of the Study

 

One limitation is the assumption that the individual entrepreneurs

12 . . .
are owner-managers. The reason for this assumption Is that we are

 

1zLeland H. Jenks, "Role Structure Of Entrepreneurial Person-

ality, " Change and the Entrepreneur (Cambridge, Mass.: Harvard
University Press, 1949). p. 115.

 

not concerned with what has been called entrepreneurial teams. We
are concerned, rather, with one individual who is primarily responsible
for the direction of the firm. This individual we define as the entre-
preneur. In some Of the cases, however, ownership was divided among
a number Of partners or stockholders. In these cases an attempt was
made tO interview only those individuals who were considered tO be

the major driving force. Some interviews were dropped from the
analysis since it was impossible to determine who had the major say

in the direction Of the firm. In some cases two or more individuals
collaborated in starting a company some years previously, and yet

we interviewed only the individual who was currently president Of the
organization. We had to call this individual the entrepreneur and
implicitly assume that he was the driving force at the beginning of

the initiation phase of the firm in order to proceed with the analysis.

CHAPTER II

RESEARCH PROCEDURES

Sample

The data were collected using unstructured interviews which
were conducted with one hundred and ten enterprises. These inter-
views lasted from a minimum of two hours to a maximum Of seven
hours. The entrepreneur was asked to give a history Of his own life
and also the life history of his firm. The history Of his firm was
quite complete and included information on financial backing, pro-
duction processes, personnel utilized, markets, marketing methods,
market research, production methods and new product development.
Probing was done to determine what plans he had for the future.
Also, the interviewer observed and recorded information on the type
of Office layout, the type of furniture, the condition of the plant and
the location of the plant in the community. In addition, observations
were made about the individual entrepreneur-dais office decor, his
dress, and the manner in which he treated his employees and they
him. The data being used in this analysis are the same as those

used in The Enterprising Man by Orvis F. Collins and David G. Moore

 

11

with Darab B. Unwalla. For more details on the sample the reader

should refer to The Enterprising Man.

 

The data from the one hundred fifty interviews conducted were

gathered for the specific purposes of The Enterprising Man. Only

 

fifty-two of these interviews were used for the study here. The re-
maining interviews were not included because there was not enough
information relevant to this analysis. Of the fifty-two interviews
included, the writer conducted or was a member of a two-man inter-
viewing team in twenty-eight of the cases. In at least twelve of the
remainder, a sociologist conducted or was a member of a two-man
interviewing team. In the remaining twelve, a doctoral candidate in
Business Administration conducted or was part of a two-man inter-
viewing team.

Entrepreneurs were interviewed in six cities in Michigan.
(The firms chosen came from a broad range of types of manufacturing
industries. Firms were Chosen that had started business subsequent
to 1945, in order to rule out any firms that started during World War
H and thus avoid any exceptional circumstances due to problems of
wartime. In addition, no firms were (included that had been in
business for less than five years. This limit was decided upon so
that the firms studied would have survived the first few problem

years. This selection of firms is in contrast to the selection of

12

firms made by Oxenfeldt. 1 He limits his study to firms that were
less than one-year Old on the basis that he would then be examining
the problems involved in the initiations Of the firm. Since approxi-
mately half Of new firms fail within the first five years, we are by
definition including those firms which can be termed successful.
This minimum age Of five years also has an advantage in that we are
not limiting our analysis to the stage of initiation. Rather, it is
possible to look at the subsequent phases defined by Cole as mainte-

nance and aggrandizement.

Exploratory Study

 

This study is a formulative or exploratory study. As well-
known writers on the subject have said: "Formulative or exploratory
studies-qthe rrajor emphasis is on discovery of ideas and insights.

Therefore the research design must be flexible enough to permit

 

leenfeldt, New Firms and Free Enterprise, p. 75.

 

2One study reports on the failure rate in manufacturing in
Michigan during the years 1953, 1954, 1958 and 1959. It shows
that 43. 4% Of new manufacturing firms failed within the first 5
years and 69. 5% failed within the first 10 years. See A. Coskun
Samli, ”Business Failures in Michigan, ” The Michigan Economic
Record,IV, NO. 3 (March, 1962), 7.

 

13

the consideration Of many different aspects Of a phenomenon. "3
In suggesting research methods Sdtiz et a1. say:

. . . It is possible to suggest certain methods that are
likely to be especially fruitful in the search for important
variables and meaningful hypotheses. These methods
include: (1) a review Of the related social science and
other pertinent literature: (2) a survey Of peOple who have
had practical experience with the problem to be studied;
and (3) an analysis of 'insight-stimulating' examples.
Most exploratory studies utilize one or more Of these
approaches.

Whatever method is chosen, it must be used flexibly.
As the initially vaguely defined problem is transformed
into one with more precise meaning, frequent changes
in the research procedure are necessary in order to pro-
vide for the gathering Of data relevant to the emerging
hypotheses.

In discussing the analysis Of insight-stimulating examples,
Selltiz, et a1, hold that there are three features Of this method Of study
which are useful in evoking insights. First is the attitude of the
investigator which is one of seeking rather than testing existing
hypotheses. The features of the Object being studied guide and re-
direct his inquiry as new information is Obtained. Secondly the
individual or situation is studied intensively and extensively as it
is in the present and the past. A third characteristic of this method
is its reliance on integrative powers of the investigator. This approach

is sometimes criticized since the conclusions tend to reflect the

 

3Claire Selltiz et a1., Research Methods in Social Relations
(New York: Henry Holt and CO. , 1960), p. 53.

14

investigator's predispositions rather than the Object of study.
However, Selltiz, et a1, 4 feel this last point is not completely
undesirable when the purpose is to evoke rather than test hypo-
theses since, if the material serves to stimulate the explicit

statement Of a previously unformulated hypothesis, it is valuable.

'Analytical Method: Constructingrldeal Types

 

In analyzing the man (entrepreneur), the method Of analysis
used is that which has been called constructing Ideal Types, in
sociological terms. Also, in analyzing the character of the firm
the same procedure and the same method of analysis have been
utilized. A discussion by Don Martindale5 gives a thorough review
Of the history and utilization Of the Ideal Type in sociology. He
concludes:

In areas where quantification is inadequate and incomplete

mathematical models are as yet unavailable and where one

on the other hand is unable to experiment there is no choice
but to find bases on which one can compare cases. One
compares two or more actual sets of affairs. The function

Of the ideal type is to isolate the factors in which the compar-

ison becomes critical. The degree to which the relations
involved in the type are intuitive seriously curtails the extent

 

4Selltiz, et al., p. 60.

5Don Martindale, "Sociological Theory and the Ideal Type, "
Symposium on SociOleical Theory, L. Gross, editor (Evanston,
111.: Row, Peterson and CO., 1959). pp. 57-91.

 

15

one can generalize on the basis Of them. However in the
early stages Of science one accepts help from whatever
quarter.

However, the method tO be utilized in this analysis will
follow that develOped by John C. McKinney who worked very closely
with Howard Becker in this area. McKinney calls it the ”Becker-
McKinney Model. " In a discussion Of type construction6 McKinney
holds that there are fundamental qualities Of similarity that are
shared by all types. He holds that types are constructed around
certain persistent variables: one, the relation Of the types to the
perceptual experience (ideal - extracted); two, the degree Of abstrac-
tion involved in the type (general - Specific); three, the purpose of
the type (scientific - historical); four, the temporal SCOpe of the
type (timeless - time bound); five, the Spatial scOpe Of the type
(universal - local); six, the function required Of the type (general-
izing - individualizing).

These areas can be viewed as the axes around which types
are constructed, and they are the main dimensions of types in
general. He envisions preceding variables as a series of continua

which serve to delineate the structure of the type. The labels in

parentheses, such as ideal-extracted, are the polar points of these

 

6John C. McKinney, "The Polar Variables of Type Construction,’
Social Forces, XXXV (May, 1957), 300.

 

l6

continua and are the polar variables of type construction. He
develOped these types from reviewing modern sociological literature,
which has been cast in typological form and which holds that we can
analyze any type in terms of its tendency to conform tO the require-
ments Of one pOle or another on each Of the above continua.

In this study the relevant continum for constructing types of
entrepreneurs and types Of firms is the "ideal - extracted" continuum.
In discussing this, McKinney holds that Max Weber's types would fall
at the ideal end of this continuum. Weber‘s types are structured so as
to accentuate some attribute or group of attributes relevant to the
research purposes. The ideal type serves as a model or basic
(comparative unit and all empirical occurrences appear as deviations
from the theoretically conceived ideal type. The ideal type serves
as a consciously devised and delimited conceptual tool in the analysis
of the empirical world.

At the Opposite end of the continuum we have the extracted or
empirical type. The extracted type involves the comparison from
a central tendency. It is based on the notions of the average, common,
and concrete rather than upon accentuation and abstraction, as is the
ideal end of the continuum. That is, the ideal type involves comparison
from the ideal limits of the case whereas the extracted type involves

the comparison from a central tendency.

17

McKinney then makes the point that the Becker-McKinney
model Of type construction is a conscious and purposive attempt
to combine aspects of the ideal and Of the extracted types so as
to capitalize on what they both have to Offer and to avoid their
limitations. 7 He says:

The Constructed Type is a purposive, planned selection,
abstraction, combination, and accentuation Of a set of
criteria that have empirical referents, and that serves
as a basis for the comparison Of empirical cases. Although
all types are constructed, Becker and McKinney adhere
tO this particular model Of construction because they find
it tO be useful scientifically. This model Obviously is a
close relative to the ideal type, and the Weber type version
is admittedly the primary source Of its develOpment. There
is a significant difference, however, which can be pointed
out by saying that the Becker-McKinney model has been
drawn away from the ideal pole Of the continuum and toward
the extracted pole. This has been accomplished by placing
the emphasis on the Objective probability Of the occurrence
Of the type empirically, rather than its mere Objective
pos s ibility.

 

 

 

It should be noted that the entrepreneurial types and the company
types that are to be constructed in the following chapters will follow
the methodology outlined in the quotation and will be of the Becker-
McKinney type.

In a subsequent article, 8 the definition of a constructed type is

continued:

 

7McKinney, XXX V, 3 03.

8McKinney and Kerckhoff, "Towards a Codification of Typological
Procedures, " Sociological Inquiry, XXXII, NO. 1 (Winter, 1962), 128-35.

 

18

The elements and relations as actually found in historical
and contemporary social life supply the materials out Of which
the conceptual tOOl is constituted. These are identified,
selected, articulated, and simplified into the constructed
type on the basis of some idea Of the sociologist's as to
the nature of social reality and on the basis Of the purposes
Of his inquiry.

They gO on to bring out the procedural steps in setting up a type.
Since this procedure is followed where possible in the ensuing
analysis, these steps will be briefly outlined. For a more detailed
analysis the reader should consult the original article.
1. Delineation Of the problem situation
The sociologist or typologist or social scientist is concerned
with some substantive area Of inquiry. In this research the
problem as posed in the previous chapter concerns the relation-
ship between the type Of entrepreneur and the type of company he
builds and the growth Of this firm.
2. Familiarization with data provided by the historian or other
informants with regard to thelroblematic situation
In this study this knowledge was gathered through familiarity
with secondary sources and from the interviews with the entrepre-
neurs. Writers in the area of entrepreneurs and entrepreneurship

are drawn from many fields, including history, sociology, cultural

anthropology, economics, and psychology.

l9

3. Derivation Of hypothesis about relationships and sequences
On the basis Of his knowledge the typOlOgist may be led to.
. make a tentative hypothesis. In discussing his example Of a method
typological procedure McKinneyg-says:

On the basis Of this knowledge Of 20th century German
characteristics and the Hitlerian movement, the typologist
might be led tentatively to hypothesize a very limited involve-
ment Of the German intellectual in the Hitlerian regime and
its aggressive acts. In order to arrive at this tentative
hypothesis, it will be necessary for him tO turn to a more
abstract level Of analysis while at the same time keeping in
mind the specifics of the historical situation with which he
is dealing. When he turns to the sociological conceptual
framework for the analysis Of social systems and the role
played by particular segments Of pOpulations in social systems,
he develops a more abstract statement Of his original problem.
In so doing, he is able to generate a specific hypothesis rele-
vant to his original empirical problem and at the same time
make a more general statement, only one example Of which
is represented by his empirical problem.

In the particular example we are using, for instance, he
may define the intellectual as the professional man Of knowl-
edge with further Specification of the kinds of individuals
included in the class. He will also classify the Hitlerian
social system according tO some scheme such as the following:
charismatic, affectual, traditionally oriented, prescribed-
sacred, and anti-rationalistic. At this higher level Of abstrac-
tion, then, he would hypothesize that in such a social system
there would be relatively little emphasis on the general role
of knowledge, and consequently the intellectual, as the profes-
sional man Of knowledge, would probably be relegated to a
minor and passive role in the social system. The hypothesis
at the general level would thus be: In a charismatic, affectual,
traditionally-oriented, prescribed-sacred, and anti-rationalistic
social system intellectuals will play a relatively minor and

 

9McKinney 8: Kerckhoff, XXXII, 729-30.

20

passive role in the central activities Of the social system.

At the more specific empirical level in which the typologist

is originally interested, he would state his hypothesis as

follows: The intellectual was not an important factor in the

Hitlerian order.

At this stage Of analyzing the interviews involved in this study

the general hypothesis was concerned with the growth of the firm.
The tentative hypothesis was: Growth in a modern industrial society
requires diversification by a company. At the more specific empirical
level the tentative hypothesis was: The orientation Of the entrepreneur
must be broader than his particular industry. This in turn requires

that the entrepreneur be able to handle a complex role structure.

4. Delineation of empirical uniformities and pragmatic reduction

 

to type
On this point McKinney and Kerckhoff10 say:

The class Of intellectuals having been roughly blocked
out as consisting Of professional men Of knowledge, the
typologist then attempts to define the attributes of this
class. These attributes are empirical uniformities of
the class, but they are chosen so as to be most signi-
ficantly representative Of the intellectuals' behavior
with respect to the social system. He chooses those
attributes that stand out as being the most Obvious or
the most crucial with reapect to this relationship between
the class Of intellectuals and the type of social system
being dealt with. He defines those attributes in pure,

 

 

10McKinney & Kerckhoff, XXXII, 130.
The underlined words were not underlined in the original.
They are underlined by the writer.

21

possibly even exaggerated form and then imputes to them

the character Of system. In other words, he assumes

for the purposes at hand that they belong together and

hence are representative of the system Of behavior called

intellectual under the type Of social conditions postulated.

The type then is a hypothesized compound Of empirically

Observed, but selected and purified attributes Of the class

being studied.

In the following two chapters two entrepreneurial types will

be constructed. These are held to be polar types Of entrepreneurs.
The attributes chosen are held tO be most significantly representative
of their behavior in respect to the organization they have built. "The
attributes are defined in pure and exaggerated form and to them is
imputed the character Of a system. ” It is assumed for the purposes
at hand that they belong together and are representative of the system

Of behavior called entrepreneur.

5. Substruction of the type to the attribute sphere from Which

 

it is drawn

 

This step will be discussed in Chapter V.

6. Adaptation of available theories and principles to me a

 

tentative explanatory accountinLof this type

 

This adaptation will be presented in Chapter VIII.
7. Empirical verification of the type: examination of the rate

of incidence and degree Of approximation

 

Chapter V also contains this step.

22

8. Interpretation .

This is made in Chapter ,VII, entitled, "The Man and the Firm:
The Logic Of Fit. "

McKinney summarizes his article by saying:11

It would seem evident that a manifest function Of types is
to identify, simplify, and order the concrete data sO that they
may be described in terms that make them comparable. They
function in this way at any level Of abstraction, and hence can
be utilized with respect tO problems varying from limited to
great breadth Of sCOpe. The primary role Of the constructed type,
however, would seem to be that Of a sensitizing device. Its use
allows sociologists cognitively to map broad areas Of sociological
phenomena through the systematic tapping Of historical and
secondary data. A type, in effect, constitutes a reduction from
the complex to the simple, hence the careful construction and use
Of types, as an intermediate procedure, can potentially make
many large-scale problems accessible to more refined method-
ology and technique. This could conceivably result in increased
precision of analysis in many areas Of sociology, particularly
in the area Of macro-sociology where the problems are Often
currently beyond the scope Of most rigorous experimental and
quantitative techniques.

 

11McKinney 8: Kerckhoff, XXXII, 135.

CHAPTER III

THE CONSTR UCTED CRAFTSMAN-ENTREPRENEUR

Introduction

 

In this chapter the major attributes Of one constructed ideal
type of entrepreneur will be defined, namely, those Of the Craftsman-
Entrepreneur. The uniformities that are deemed to be most signifi-
cantly representative Of the Craftsman-Entrepreneur's behavior in
initating, maintaining and aggrandizing his company will be drawn
from the empirical cases. Specifically, we will look at his life
history, including his education, family background and career work-
experience. Also, we will describe his characteristic way of doing
business.

In constructing an ideal type, the elements are "identified,
selected, articulated and simplified into the constructed type on the
basis of. . .the idea of the nature Of social reality and on the basis Of
the purposes of his inquiry. "1 In the present context, the purpose

at hand is to show how the social conditioning and social orientation

 

 

lMcKinney & Kerckhoff, XXXII, 129.

24

of the craftsman-entrepreneur affect his characteristic behavior in

building a company. Orientation is used here in the same sense as

 

us ed by Merton:2

A word Of explanation is needed for this concept Of orientation.
The social orientation differs from the social role. Role refers
to the manner in which the rights and duties inherent in a social
position are put into practice; orientation, as here conceived,
refers to the theme underlying the complex Of social roles per-
formed by an individual. It is the (tacit or explicit) theme which
finds expression in each Of the complex Of social roles in which
the individual is implicated.

Merton uses this concept of orientation in discussing what he
calls "types of influentials. " He constructs two types of influentials,

local and cosmOpOlitan.

The chief criterion for distinguishing the two is found in their
orientation toward Rovere. The localite largely confines his
interests to this community. Rovere is essentially his world.
Devoting little thought or energy to the Great Society, he is pre-
occupied with local problems, tO the virtual exclusion of the
national and international scene. He is, strictly Speaking, paro-
chial.

Contrariwise with the cosmopolitan type. He has some interest
in Rovere and must of course maintain a minimum of relations
within the community since he, tOO, exerts influence there. But
he is also oriented significantly to the world outside Rovere, and
regards himself as an integral part Of that world. He resides in
Rovere but lives in the Great Society. If the local type is paro-
chial, the cosmOpOlitan is ecumenical. (p. 393).

 

There is considerable similarity between Merton's types of

influentials and the Craftsman-Entrepreneur of this study and also

 

2Robert K. Merton, Social Theory and Social Structure
(Glencoe, 111.: Free Press, 1957), p. 392.

25

the Opportunistic-Entrepreneurs to be developed in Chapter IV.

Merton, however, is concerned with the problems Of patterns of

 

influence, whereas our focus is on pptterns Of entrepreneurship.
Merton focuses his examination on ”the difference in basic orientation
[finch] is bound up with a variety Of other differences: 1) in the
structures Of social relations in which each type is implicated; 2)
in the roads they have traveled to their present positions in the
influence-structure; 3) in the utilization Of their present status for
the exercise of interpersonal influence; and 4) in their communications
behavior " (pp. 394-395). We shall use our own terms to describe
our focus when examining life history and career patterns, charac-
teristic patterns Of social and business behavior in relation to both
internal organization Of the business and relationship to the external
social and economic environment.

We will not be concerned with empirical referents until Chapter
V and therefore will not at this point in the analysis give evidence
on the number Of cases that exhibit the characteristic under consider-
ation. In Chapter V, using the constructed ideal types, we will
evaluate the actual empirical cases to determine the amount of
deviation from the constructed Craftsman-Entrepreneur and the
constructed Opportunistic-Entrepreneur.

In Chapters III and IV the use of quotations from the raw data

is for illustrative purposes only. They are meant only "to help the

26

reader understand the nature of the variables described and the

s s ’ ”3
investigator's reasoning.
A. Life History and Career Patterns

1. Family Background and Role-Models

The Craftsman-Entrepreneur4 comes from a blue-collar back-
ground. His father is usually a skilled worker in some trade such as
carpentry, printing, plumbing, tool-and-die work. Many of his close
relatives are in skilled trades as well. The C-E grows up in an
environment that values task-orientation. Early in life he sees a
clear pattern to follow. He chooses his father or some other close

relative as his role-model. 5 If there is an individual among his

 

3Selltiz, et al., p. 434.

4In the ensuing analysis the term Craftsman-Entrepreneur
will be abbreviated to C-E.

5"Role-model" is used as conceptualized by Merton. "The
person who identifies himself with a reference individual will seek
to approximate the behaviors and values of that individual in his
several roles. The concept of 'role-model' can be thought of as
more restricted in scope, denoting a more limited identification
with an individual in only one or a selected few of his roles. " Merton,
pp. 302-303.

NO attempt will be made in this analysis to determine why this
selection is made. Rather it is merely reported that the C-E chooses
a role-model from "the milieu, the immediate social environment
constituted by the social relationships in which the individual is
directly engaged. " Merton, p. 303.

27

relatives who is in a profession or a white-collar job, this person
does not seem to constitute a positive role-model. The C-E is
exposed to the work world very early in life. Even if he continues
his education to high school or beyond, he will have held part-time
jobs from a very early age. For example, one entrepreneur says:
My first jOb was at twelve years Of age. I worked for

a muck farmer south Of Brownsville. I had tO walk three

miles to work every morning and I'd get there about 6:00

in the morning. I earned 12¢ an hour and I worked twelve

hours a day. I worked pretty hard at this job and I did

pretty well. Some Of the Older men were let go before I

was.
From his family background the values Of the practical work world
and the importance Of practical accomplishments are what he perceives
and internalizes as being important. His early work experience re-

infO rc e s thi s O ri entation.

2. Education

 

Whether the C-E leaves school at the eighth grade or whether
he receives a bachelor's degree in engineering, his education can
be characterized as being narrowly limited to the technical areas.

Even if he is exposed to areas other than technical or vocational he

 

Also for a discussion Of the ”ways in which individuals 'learn'
a personal role as entrepreneur" see Leland H. Jenks, "Role Structure
Of Entrepreneurial Personality, " Change and the Entrepreneur,
Prepared by the Research Center in Entrepreneurial History (Cambridge,
Mass.: Harvard University Press, 1949), pp. 138-41.

28

sees little value in them. He is selective in his learning process

and chooses those things he thinks will be useful to him in a techni-
cal career. Anything outside Of those areas is considered impractical
and not useful. As a result Of this orientation he does very poorly

at anything except the technical subjects. As one individual says:

In school I was terrible in English and history. In fact,

I even flunked bookkeeping. All through high school and even
tO this day I don't know how tO write. While I was at Midwest
Die Sinking I did learn how to write my name sO I could sign
checks. But as Of now, that is the only thing I can write.
, Whenever I have to communicate with anyone I have to print
it.

Another individual went to night school in Michigan and took
courses towards a bachelor's degree in engineering. However, he
did not graduate because he would not take some twenty or thirty
credits in the required liberal arts electives. Another entrepreneur
earned tOp grades in all his sciences and mathematics but received
only C and D grades in the liberal arts courses.

In pursuing a formal education the orientation of the C-E
is such that he is only concerned with the pragmatic, the practical,
the how-tO-do-it aspects of learning. The other areas are not

important because he feels they are not concerned with the ”real

world” and will not show practical, concrete results.

29

3. Work Experience

 

a) Success Theme

 

The work experience of the C-E prior tO the time Of initiating
his own business is characterized by the success theme. NO matter
what route he takes, he completes the required steps more quickly
than his associates. He soon establishes a reputation for accomplishing
any job more efficiently than his cO-workers. This "success theme"
is not identical to Merton's success-goal as utilized in his analysis
Of Social Structure and Anomie. He says:

Contemporary American culture appears to approximate

the polar type in which great emphasis upon certain success-
goals occurs without equivalent emphasis upon institutional
means. It would Of course be fanciful to assert that accumulated
wealth stands alone as a symbol of success just as it would be
fanciful to deny that Americans assign it a place high in their
scale of values. In some large measure, money has been con-

secrated as a value in itself, over and above its expenditure for
articles of consumption or its use for the enhancement of power.

(p. 136).

It appears that the C-E may represent a sub-cultural type
which does not take "monetary success" as the primary goal but
rather focuses on attaining mastery over machines as the primary
cultural goal.

He seeks mastery over machines and by mastering them he
proves his superiority over other individuals working in the same

type Of job. To the C-E, this is being successful. As one

30

individual stated:6
Well, the first job I started after school was with the
Mammoth Motor Company. Within six months I had learned
tO run every machine in the shop. Then I went tO the Mammoth
Technical School. I went through that within a few months.
You see I'd taken a lot Of courses in high school in shOp and
I was ahead Of everybody else. Because I did so well in the
technical school, I was given a promotion and put into the
tool room. By the time I was 22 years Of age I was in charge
Of all maintenance and equipment used on the site of the Pebble
Dam. Also, I trained peOple to do the maintenance on the
equipment on the dam.
b) Becoming a Mechanical Genius
There are twO distinct patterns Of early work experience that
have the same goal Of becoming a mechanical genius. One is the
job-hOpper and the other is the entrepreneur who stays with the
same firm for twenty years. One job-hopper interviewed had
seventeen jobs in a period Of twenty-five years. The longest
length Of time that he stayed with any one Of these jobs was six
years. According to him, he did not get fired from the jobs but
was very successful in each of them. However, he said that he

got bored with them very quickly and moved to a new job when it

appeared to be an advancement or would provide new experience

 

Quotations Of this kind will come from the records Of inter-
views with the entrepreneurs in the sample. The information is
confidential so identifying names and places will be changed.

31

for him. As a result Of this, an individual ends' up being adept
and skilled in many areas, a mechanical genius. In addition,
he gets to know almost all Of the peOple in a particular industry.
On be other hand, the entrepreneur who stays with a large company
for a long period Of time also gets wide and varied experience. He
moves from one job to another in the plant and finally attains a super-
visory position. He becomes a mechanical genius also and also comes
to know almost everyone in a particular industry.

The work experience Of the C-E serves a number of functions.
In the first place, it provides him with much skill and expertise in
many areas Of his particular area or job. He becomes a mechanical-
genius. He establishes a reputation for being better than his co-
workers in working with mechanical problems and machinery.
Associated with this reputation is the fact that he gets to know almost
everyone in his industry and,more important, everyone gets to know
him. His mechanical adeptness and reputation are extremely important
factors to the success of his later endeavors in initiating a company.
They also constitute an important part of his business strategy when
he gets his own organization. It should be noted that, whether he is
a job-hOpper or a one-company man, his training and outlook remain
fairly narrow. His major orientation is still to the plant and to the

technical or physical problems. Even if he has twenty jobs in twenty

32

different cities, his awareness Of the world is limited largely to
the plant and production problems. He is, in the classical sense,
production-oriented.

c) A Marginal Man
(1) Identifies with Management?

 

The C-E's talents are soon recognized and he moves
quickly up the skilled-worker ladder. At the tOp Of this ladder are
the prize jobs such as foreman, master mechanic, and superintendent.
His success, therefore, does not carry him out Of the work plant. He
does not relate nor identify well with tOp management and is not really
in tune with the broader company problems and goals. His world is
in the plant. Also, he does not really like a big company because he
believes it is not efficient. As one C-E says:
That company was very slipshod in handling their equipment
and I didn't like it. Then too, I found that if you want to get
ahead in a large company you have to play politics. You have
to be the fair-haired boy and I didn't want to feel that my future
depended upon somebody else's decision.
This statement indicates his feeling that management does not really
realize what is most important in a company. It also exhibits his

fear Of outside control which we will see more evidence Of later.

(2) Identifies with Union?

 

It would seem logical to assume that if he cannot

closely identify with management then he will identify with the union,

33

but this is not so.

In some cases he may join the union but he does not inter-
nalize the union values. He feels that a man should turn out a good
day's work for a good day's pay and that this is not the value held
by the union. As one C-E expressed it:

When I'm in business for myself, I can't be told to do

things that are against my better judgment. I do what I

feel in my heart is right. You take for example the unions --
they plot and they scheme to try and get the best advantage
when a new contract is coming up. Then, if the contract is
signed they are plotting and scheming on how they can get a
little bit better advantage over management on the next con-
tract. This goes On all the time and it just isn't right. This
just isn't right at all.

The C-E feels it is important to do the best work possible
in the most efficient way and that one should always do a good job.
In attempting to accomplish these goals, he finds that he runs into
trouble with the unions. They are against a rate-buster. On the
other hand, management doesn't back him up either. One entre-
preneur expressed this feeling as follows:

Another thing about working there; you had to punch in

and you had to punch out. If you were five minutes late
somebody reamed you up one side and down the other; but
if you worked five minutes after closing, nobody came along
and thanked you. You can't seem to do anything right to
please anybody.

Since he cannot identify with management and he cannot identify

with the union, he identifies with other "rebels" like himself. As

one fellow stated:

34

I've a bunch Of rebels here. These guys have worked in
a lot Of plants all over the country. They have done alot
Of different types Of work and they're really flexible. They
can do almost anything. I think that that is one disadvantage
Of the union- -that it limits the training Of people. They are
stuck on one job and they don't learn anything about another
job. They can work at a place for ten years and never turn
around and find out what the guys on the machines behind
them are doing. I think that this country needs gpod mechanics.
All this research and experimentation is important, but you
have to have good mechanics tO turn it out and do the work.
That is the trouble, there just aren't enough of them around
any more.
In conclusion, the C-E finds he cannot identify with management
or the union. He is a marginal man and when he starts his own company

he tries tO hire other "rebels" like himself.

Circumstances Of Initiation

The interviews indicate that the C-E has not held the goal or
dream Of starting his own company from the beginning of his job
career. His search for expertise in all areas Of his industry is not
motivated by the idea of starting a business. One aSpect of his
decision tO initiate a business seems to revolve around the feeling
that, if he is to continue to be tOps in everything, this is the way
he must move. He has gone as far as he can in proving himself
a mechanical genius and now the only way to continue the ascent of
his personal star is to start his own company. As one individual

said:

35

I've never played second fiddle in my life. I've always
been first. I've broken several records and I've established
a reputation. I've won merits, awards and appreciation cer-
tificates. When I do something, I almost always make up my
mind tO make a big show Of it.

As was noted in the preceding section, the C-E, while working
for another company, does not identify with management even if he is
in a supervisory position, nor does he identify with the unions. He
is an isolae with the possible exception Of other ”rebels" like him-
self working in the plant. This isolated position gives rise to two
types Of feelings. On the one hand, he does not feel overly secure
in his job because he does not identify with management or the
majority Of the other workers. Therefore he comes to believe that
the solution tO his problems is to become independent in his own
company. At the same time he has no great respect for either manage-
ment or the majority of the plant workers and has a feeling that he
could do much better working with individuals like himself in his own
company. One man related:

I first started thinking about my own business when I was

in apprenticeship training. You see, I went up to the tOp

apprenticeship rate of pay within six nths, rather than
taking the usual period Of eight years. The union didn't

 

7This is not necessarily an exaggeration. During the Second
World War, "trades such as pharmacy and watch repairing were
treated in a purely instrumental way and trained efficient practitioners
in five or six weeks to the horror Of established members of these
callings. " Erving Goffman, The Presentation of Self in Everyday
Eff (Garden City, New York: Doubleday, 1959). p. 46.

 

36

like this and we got into a hassel about it. That gave me
the idea that someday I wanted to be in business for my-
self. I didn't want to be subjected tO outside pressure.

I wanted to be able to do what I wanted to do. Iwanted to
be treated in a way I thought fit tO treat others. I didn't
want to be treated the way some outside organization
(the union) felt that I should be treated.

In this case the C-E felt insecure because of his isolation from
the workers of the union.

On the other hand, the C-E cannot identify with management

I

because he feels that they demand tOO much socializing and "politicing. "

As one C-E said:

I was taught as a child that you can do anything you want
if you have the desire to do it and put all of your energy into
it. I don't like the impersonality Of a big company and I
feel that anyone with guts or brains wouldn't stay in it for
the low income. There is no challenge in working for a big
company. There is nothing to get your teeth into. You
don't learn anything but you see the same peOple every day
and you have the same problems time after time. All you
have to do is keep your work going through. If you pull
the right strings you get promoted; however, if you don't
like that type Of thing and just want to work and turn out
good work and do a good job, you're not going to get any-
where. I don't like that.

Here the theme is stated explicitly. By going into business for
himself, a man will be able to get other good workers like himself
and they can do a good job together. In addition, he will gain
security because with his independence he will not have to be
dependent'upon the vagaries of the personal Opinions of management.

He won't have to play politics and attempt to be a fair-haired boy.

He will be able to stick close to the work world and deal with things,
rather than being concerned about social interaction.

The study indicates that, in Spite of all the lure Of independence,
security, and the Opportunity to do good work without interference
from the tap or from the union, the C-E does not suddenly quit his
job and start on his own. Rather, some critical event has tO occur
which acts as a catalyst. Possibly he is fired, or an unusual
Opportunity arises to buy into a failing company or buy used equipment
at a good price. The C-E starts his company in conjunction with
some other friends. In many cases, these will be relatives or close
friends Of similar background and orientations. In some instances,
they start this company as a part-time venture, and after it proves
to be profitable and they see it will provide an apprOpriate income,

they quit their jobs.

B. Characteristic Patterns Of Social and Business Behavior

 

In this section we will define the attributes Of the C-E. These
attributes are empirical uniformities of the class, but they are chosen
so as to be most significantly representative Of the C-E's behavior
with reapect to the initiation, maintenance and aggrandizement of his
company. The attributes held to be most crucial with reSpect to the

relationship between the C-E and his organization concern three major

38

areas:8 first, how he develOps the internal organization essential

to the accomplishment Of his goals; second, how he relates his
company to the external business environment; and third, how he
involves his company and himself with his external social environment,
specifically with the local community in which he and his company
reside.

1. 1 Internal OrLanization

 

a) Paternalistic in Emplgyee Relations

 

The C-E tends to think Of his employees as being part Of his
family. He feels they are somewhat childlike or immature and
should be treated accordingly. One has tO be concerned with
guiding them along the ”right" path. As one individual said,

I look on myself as a father to my workmen. I feel that

my workers will turn out good work if they don't have troubles
on their minds and I discovered that working in shOps myself.

If you can take their minds Off their troubles then they can
really get out and work for you. I have an Open-door policy

 

8The areas to be considered are chosen following the methodology
used by D. G. Moore in "Managerial Strategies, " Industrial Man,
editors, Warner and Martin.

A similar approach is that us ed by Leland H. Jenks who hypothe-
sizes that you can "analyze the patterning of any business unit in terms
of at least three interrelated sets of invariant requirements, namely,
as a system of exchanges, as a system Of productive performances,
and as an organization. " Jenks, pp. 114-26.

However, this latter approach is less useful to the present
analysis because it ignores the area Of the social environment which
is important in distinguishing the C-E from the O-E.

 

39

at all times. I feel that my workers need the security and
peace of mind that comes from having a secure job. How-
ever, I don't interfere with the home life Of my workers.
Through the years some of my workers have made more money
than I have. But they are out there in the shOp producing
and they deserve it. I don't believe in putting on extra help
when business speeds up; instead what I do is see tO it that
the guys understand that business has picked up and then
they will speed up their work tOO. They'll do this because
they know that we are not going to put on extra help or give
away extra money. Therefore, we pay lots of overtime.
Last year, even though it wasn't a particularly good year,
every grinder hand, which is the lowest rated machinist in
the plant, made over $12, 000. I listen to all their gripes
and complaints and I try to straighten things out for them.
Actually I have a very close personal working relationship
with all Of my workers and I know them all by their first
names.

The entrepreneur who sees himself as a father to his workers
has to protect his children from the temptations of the outside world.
One Of these temptations is that Offered by unionizations.

I don't want to see my company ever expand beyond this
size; with the size it is now I know my employees and they
know me. There is no union here and I don't want a union in
my business. I want the employees to feel close to me; I
want to know what they are doing; I want to be able to share
my home, my life with them, and have them feel that they
can share their families with me. If it goes beyond the
present size, I don't think we will be able to have this
close relationship. For example, when it comes to wages,
I don't have any time clock here. I don't keep tract of my
employees' wages. At the end of each week each person
submits his own time. Only in a small shop can you do
this. If it grows much larger I'll have to put in some means
of keeping track of the employees' time. Also, I feel that
the record kept in this manner gives the employee a greater
sense Of responsibility and so the employee feels more at
ease here. I think the reason I have been able to make my
business strong is mainly because Of the interest I've had

40

in my employees and the amount Of time I spend with my
company. I have no real activities outside Of my business
except my family. My hunting and fishing activities have
been incorporated into my family activities and we do

all Of these things as a group. My company is like my
family to me. I look after it in the same way that I would
my family.

This individual is a little extreme in the trust he puts in his
employees, but he does illustrate the way the C-E feels toward his
workers.

The C-E believes he finds additional evidence that his workers
are like children when he Observes the way they spend their money.
As one C-E expressed it,

I don't believe in driving new cars. My Old Ford out there
is good enough for me. I'm not squandering my money on
new cars. What money I have goes into my home. This
doesn't seem to be true with the fellows who work out in the
plant though. As soon as they get a little extra money,
the next thing you know they are out buying new cars. It
seems to me that I am forever writing letters of credit
recommendations to banks for my men. Every time business
looks good, all you have to do is look out in the parking lot
and all kinds of new cars seem to be Sprouting out there.

If you look out there you will see most of my fellows drive
better cars than I do.

Another example Of this belief that workers are like children
and must be protected against evil influences from the outside world
is shown by the hiring policies of one individual. He said,

For example, you'll notice that I don't have any

women working in the Office. The reason is that it
would be a lot Of trouble because the men will find all

sorts of excuses to get into the Office here where the
women are.

41

We can see, then, that the good father to his employees builds
a world Of security for them, helps them solve their personal problems,
protects them from the temptations Of unionism and women workers
in the plant. In return for this attention what must the worker do?
A good worker is very valuable. As one C-E said,
A good workman on a good piece of equipment can
turn out twice as much as a poor workman on a poor
piece Of equipment.

However, a gOOd workman is hard to find.

I feel that you have to hire 50 or 60 peOple to get
14 or 15 good ones.

What is a good worker?

A good person is someone who is interested in his
job--that is, a person who takes pride in his work; one
who is not thinking about something else when he's on
the job; someone who will attempt to do a gpod honest

LOO for you.

 

A good worker, therefore, is honest, loyal, and thinks Of
nothing except his job. These attributes return to the C-E because,
in a sense, his employer owns his time. As one C-E put it,

I have always been a hard worker. I've always given
a man more than was really required. I feel that if a man
hires you, you no longer own your time; it's his. AS a
result Of this philOSOphy, I always had a job and I always
did well. I feel that if a man is being paid by me, I own
his time. I expect people to work hard and to do a good
job and to try. However, there is no point in climbing
up one side and down the other Of a person when he makes
a mistake. This doesn't do any good at all. What I do
is this: I say, 'Now you see what you did wrong? Why did

42

leciluttu anything II (3.11 -111 L' 9.:x£.t‘ ' 16.1.-u . ‘

way people learn and improve.

In other words, although he owns this man's time, there is no point
in being too severe since the worker may then become recalcitrant.
It is something like dealing with a child, and a C-E must apply the
most modern and effective methods Of child psychology.

b) Plannin and Dele ation

The C-E is not oriented to the future and actually does little ‘
to plan for it. What planning he does is concerned with internal
production processes. He is not concerned with changing the basic
character of his company to adjust to a changing external environment
such as a declining market or increased competition from other manu-
facturers. For example, one C-E was forced out of producing two
different products because Of technological advances and increased
competition. In neither Of these cases did he take positive action
to meet competition either through adjusting his product or increasing
his marketing effort. He seemed to be resigned to accepting whatever
happened. Almost as an afterthought he mentioned vaguely that he
had been thinking about a new piece of production equipment that had
been developed called an electro-erosion device for cutting dies.
However he had no definite plans for purchasing this equipment.
He was ”just sort of thinking about it. " He had no plans for expansion

or retrenchment but was oin to "'ust wait and see what ha ened. "
8 g J PP

43

The C-E does little to insure the continuity Of his company
and prepare for the time when he can no longer manage the company.
He holds tightly tO-the reins Of control. He does not delegate authority
and responsibility. He does not have an executive assistant or some-
one who can take over in case something happens tO him. This behavior
is associated with his limited time horizon, his failure tO look to the
future and plan for it.

An example Of the limited extent to which a C-E delegates
authority is quite apparent in the following conversation:

A couple Of years ago I developed a heart condition
so I decided that I would delegate authority, and I have.
One fellow looks after the sales and then another fellow
looks after - Oh - this and that around the plant. All that
I have to do now is make the decisions and then Of course
I do some work in the plant and then I do the estimating
and I keep track Of the price per job. I take a week Off
and go deer hunting every year now and we also take a
vacation a couple Of times a year - in the Spring and in
the fall. I work five days a week. I don't like to miss
days during the week but I try not tO work on weekends.
Saturdays and Sundays I try to leave free.

c) Hiring Personnel

 

The work force and Office personnel of a C-E'S firm are

hired on a particularist9 basis. In the context Of the present

 

9The constructs, ”particularistic" and "universalistic" are
discussed by Jenks, Change and the Entrepreneur, pp. 120-121,
who says that he uses the terms as conceptualized by Talcott Parsons
in "Essays in Sociological Theory, " pp. l92ff.

44

discussion, the C-E relies on particularistic standards in hiring
since he lacks confidence in the more abstract forms Of evaluation
such as tests. He attempts to hire individuals whom he has known
personally in his work career or who are known personally to some
Of his friends. In many cases when starting his new company he
will take workers with him from the Old company. He chooses those

who are similar to him in that they are "rebels, " highly work-oriented

 

In discussing the importance Of the criteria used by the entre-
preneur, Jenks says: "Whatever the criteria for overall performance,
there must also be some for the various contributors Of 'work', for
the part performances. It must not be supposed that these criteria
can be completely imposed at the whim Of owner-manager. He is,
however, responsible for the bases on which personnel is selected,
promoted, or dismissed; the criteria according to which combinations
Of labor and capital are effected; the criteria for sources and types
Of financing and procurement; the criteria for market policy; and for
the relation (positive or negative) between all such criteria and that
Of profits.

Empirical historical inquiry into entrepreneurship is very much
concerned with the nature and source Of such criteria. Special atten-
tion seems to be appropriate to the question in what degree they have
been universalistic or particularistic. In this connection, 'universal-
'istic' criteria would involve an Object standard applied to the perform-
ance Of any individual in a given role, regardless of his antecedents or
personal connections. 'Profits', however regarded, constitute such
a criterion. And from profits economic theorists, with the aid Of a
few simplifying assumptions, have deductively derived similarly
universalistic criteria supposedly applied by businessmen to every
individual task. Supported by such views, there has been a tendency
for moral indignation to be diSplayed at Observed departures from
such standards, involving conSpicuously such matters as nepotism,
favoritism etc. At the same time, distinguished business leaders
have for centuries asserted that what are basically particularistic
criteria do and should play a great part in business performance. The
granting of credit provides a well recognized illustration: 'The basis
of credit is character', etc."

45

and not involved in union activities. There is considerable nepotism
involved in his hiring practices. Many Of his workers in the plant
and in the Office will be relatives from both his immediate family
and extended kin group. However, he does make heavy demands on
the persons related to him and expects as much from them as he
does from his other workers. They have to live up to his ideal of
the good worker.

2. Relationship to External Economic Environment

a) Capital Suppliers

The C-E fears outside control, and this colors his attitude
toward sources of capital. He does not want tO get involved with
banks because of this fear. AS one C-E remarked,

I don't use banks because they can get control of your

business and I don't want anyone to have control Of my
business except myself. I've used credit a little bit

for cars, but I always make a point of paying three or
four days in advance Of when they are due. I just don't
like to deal with banks. They are too powerful. If even
for a short time your business should go bad, the banks
gain control Of you and your business and this is bad.

Because of this feeling, the initiation of the business is usually
done with capital from the C-E's savings, from borrowing from family
members or from personal friends. Usually he will start with one
or two partners and they also will put some money into the business.

However, within a fairly short period of time he will buy out these

other partners and have control himself.

46

b) Marketing and Selling Strategies
The C-E's relationship to his customers is based on personal
contact and reciprocity. 10 Through the years he has built a personal
reputation in a particular industry. He is well known to the groups
he sells to, and depends on this fact in his selling efforts. In many
cases even before he leaves his Old company, he scouts around to
find customers. One C-E who had been a plant manager Of a small
plant that went bankrupt bought out some Of its dies, took employees
from the company and then actually retained the customers Of the
previous company. Or as another individual said,
Well, I'm known in this business. I have built a repu-
tation for doing a good job and peOple contact me in these
areas. For example, in 1960 I didn't Spend anything for
sales. I didn't go out and actually make one sales call.
One C-E who had been a job-hOpper stated that because of his

varied work experience he knew almost everybody in the auto industry

in Detroit.

 

10
The term reciprocity is used here in the same sense as

Merton used the term to distinguish between his local influential
and cosmopolitan influential. Merton makes the point that the
influence Of the local influential rests on an elaborate network Of
personal relationships far more than it does for a cosmOpOlitan.
He says that the, ”influence Of local influentials rests not so much
on what they know but whom they know" (pp. 400-401). Our C-E'S
sales and sales organization depends on the fact that he is well
known in his industry.

47

I've known people at General Motors since 1924, at
Ford Motor Company since 1928, and at Chrysler since
1928. I know everyone personally and they know me.
They know that I will turn out good work and can be
depended upon.

Another example Of the importance Of this personal relationship
to the C-E is demonstrated by the following account. At the initiation
Of this particular C-E's company, one Of his silent partners was an
ex-manufacturer's agent who had developed many contacts over the
years while employed by another broaching company in Auto Town.
It seems logical that the job Of selling should have been his. However,
the C-E did the selling for the first two years. He was more successful
at selling than the manufacturer's agent was, because Of his technical
experience in his previous work in which he had had contacts with
master mechanics, the tool room employees, and machinists. The
silent partner had his contacts only among purchasing agents. At
that time, purchasing agents did not have the power to make final
decisions on purchases, and apparently the key personnel who made
these decisions were the men in the shop. For this reason the C-E
was able to be more effective because Of the personal relationships
he had built up over many years.

Through time, however, this strategy had to change because

the big companies changed their policies so that now the purchasing

agents have the most power and influence in deciding what is to be

48

purchased and from whom. Therefore, the manufacturing agent,
who was ineffective initially, has now taken over the sales function.
The president who sold on the basis Of his personal contacts can no
longer be effective because his contacts are mainly "through the
back door. " This example is an indication Of the extreme importance
Of personal contacts and shows how this is the major strategy Of selling
for the C-E.

c) Limited Communication Ability

Associated with his dependence on personal relationships in
relating to his customers is the fact that the C-E has limited commu-
nication ability. In the interviews it was noted that the men had little
verbal energy or ability. Many Of them indicated that they have come
out Of the shop and even apologized for their use of the English language.
One mentioned,

Well, actually I guess that I am really anti-social. I
don't really like people or dealing with people. I don't feel
that I'm comfortable with them and I've found it hard to
deal with them as individuals.

To use a less extreme example:

I just absolutely hate to leave the Office. To leave
'autotown, ' to leave my family. SO all the business that
most other people would go and call in person on, I use
the phone for. Any changes or questions I have about
something, I pick up the phone and use it rather than

going tO see the person. Only in the cases of extreme
emergency will I leave this Office.

49

Since he will not travel, a C-E has to depend primarily on word-
of-mouth advertising to gain new customers. His reasons for not
wanting to travel are related to his lack Of verbal ability and lack
of confidence in new situations. These characteristics are in turn
related to his narrow background which is predominately technical in
nature. Since he has had little interest in or little exposure to the
world outside Of highly technical production problems, he does not
feel comfortable or competent away from the plant.
The C-E also has little ability in communicating through the
written word. As he admits,
Another thing is, I don't write letters in this Operation.
I get on the phone. I've noticed that when my telephone bill
is the largest, that is when my business is the best. I
don't believe in writing. I call. I feel that I'm not a composer
of letters. Rather than taking the chance of selling a man in
a letter, I can get my point Over on the phone much more easily.
In his dress, also, the C-E seems to be trying to communicate
that he is really just another worker. He does not wear a tie, white
shirt and suit on the job but prefers slacks and a Sports shirt.
Often these will not be overly clean, exhibiting to the world that
here is a man who works with his hands and is not ashamed Of
admitting it.

d) Competitive Strategies

 

The C-E builds his business on the basis of a personal

relationship which he has developed through the years in his working

50

career. He is known to peOple in his industry and has a reputation
for being dependable. He strives to turn out quality products at the
lowest price. Therefore he cuts costs in every area that he feels
will not affect the quality Of his products.

His Office style and location are oriented to the plant. The
Office is Sparsely and impersonally furnished. Usually it will be
right next tO the plant with a door Opening into the plant. The C-E
Spends little time in his Office and feels that the Office is unimportant
to his business. It is one area where money can be saved:

I don't believe our Office furnishings are particularly

handsome and I don't believe in plowing money into the
front Office here. You can see I have no paneling On the
wall or fancy furniture nor do I have a gib sailfish on my
wall like most other guys do. I don't believe in that.
You'll see that throughout all Of my Offices.

He feels a union increases his overhead. With no union, he
can shift his workers from one job to another. During the slack
season he can have them rebuilding machinery or if he is behind in
one particular area Of production he can transfer more workers to
this job.

The C-E considers that good equipment is one of the most
essential requirements Of success in business. At the initiation

of his business, the C-E will go to many auction sales to shOp for

bargains in machinery which he will rebuild. He uses the slack

51

season to keep his employees rebuilding these different machines.
As an example Of buying right, one C-E showed us an Old Cola cooler
which he used for storing precision tools. Also he had a safe in his
_ Office which he got for nothing, because he bought two Of them for
fifty dollars and then resold one Of them for one hundred and fifty
dollars.
Great care is taken by the C-E to get the best possible
equipment with the amount Of money he has available. As soon as
his business permits, he will buy new equipment since he believes
this will in turn strengthen his competitive position.
I feel that there is no point in spending money unnecessarily
on things that aren't functional. As far as this building is
concerned, it isn't fancy, but it doesn't matter because the
machinery is good. The machinery is the important thing
to my customers.
Since the C-E has built his business on personal reputation
this has to be protected. He does this by getting good honest workers
who will turn out a good day's work for a good day's pay. He wants

dependable workers to assist him in turning out a product that his

customers can depend upon. As one individual in the heat-treating

- busines S said,

I think one Should be fair and honest in business. For
example, in our business a customer can't tell if good
work has been done on a part or not because it doesn't
Show whether it has been heat-treated prOperly or not.
The customer depends upon me, so therefore, honesty is

52

extremely important. I don't believe in putting out slip-
shod work. I try to do a good job for everyone.

The C-E also protects his reputation in business by Offering
complete service to his customers. The following quote from
one Of the interviews expresses how service, quality, efficiency
are the bases Of the competitive strategies used by the C-E:

As far as my own strategy is concerned, I keep my cost
lower than my competitors. Then as far as selling is con-
cerned, I don't have to dO any. Actually, over the years, I
have gotten to know about 90% Of all the tOOl and die engineers
in TOOl Town, and these are friends Of mine. All I have to
do is keep in contact with them by phone. Because Of my
background in the tool-and-die business I am able to Offer
a lot more service than most foundaries are able to do. I
can be more competitive by giving more service. For
example, last week we were all set to pour a die and I
thought there was something wrong with it. I got on the
phone and I checked with the peOple and I made some changes
over the phone. I got the thing Squared away immediately.

This way it didn't cost our customer a lot Of time and money.

e) Plans for Future Growth

In terms of growth possibilities, the C-E sees his industry
as a closed universe rather than an Open-ended universe. That is
he believes that any increase in sales that his company may make
must be made at the expense Of others in the industry. He assumes
the sales of his total industry will probably not increase substantially
in the short-run.. The only other way things could improve for him

would be if someone else in the industry went out of business.

He does not consider going into Other forms Of business activity or

53

production. Therefore, his growth has tO be accomplished through
high quality Of product, efficiency in keeping cost down, and Offering
more services to his customers. All Of these areas Of activity, Of
course, are related to his personal reputation for integrity and
mechanical genius which he has built up throughout his whole career.
The C-E is not anxious for his company to grow and expand
for a number Of reasons.
I don't want tO grow tOO fast. I don't want to grow tOO
rapidly because I can easily use up my working capital
and when this is gone the banks get control. I don't want
the banks tO have any control over my business. My son
is too eager; he wants to push tOO fast. I was eager, also,
when I first started the business but I had tO learn the
hard way SO I am trying to keep my son down. You can't
gO-go-go all the time. I keep telling my son not to push
beyond our ability to finance. If I'd only known this years
ago. I'm going slowly; I don't want to grow rapidly. I
want control of my own business and I don't want anything

to happen to it.

The moral is clear. If you grow too rapidly, the banks can control
your business.

Another C-E stated that he had the best product in the industry
and was about third or fourth in sales. When asked why he wasn't
tOps in sales if his product was so good, he stated,

Well, I prefer to go slowly. When you are on tOp it

is too easy to come down. I'd like to progress with
the business at this pace. I'm not in too much of a hurry,
provided I can stay ahead Of competition.

Another reason for not wanting to grow too quickly or too

much is related to the feeling that the business is a family. Only

54

in a. small company can he know his men and they know him.

Also, there is the feeling that with tOO much growth, the
union gets in and the C-E loses control over the Company. One indi-
vidual was quite emotional about the union. When asked what he
would do if he were unionized, he replied,

I would close up the shOp. I have no truck with the union.
They would just drive me out Of business. Before they would
do that I would quit.

Still another reason given for not growing too much is the fact
that the government will take away any increased profit in taxes.

Actually, I had decided that I was going to build another
building right along side Of here, the same size and fill it
with equipment tOO, but I decided against it because Of the
taxes. I asked myself, 'Well, am I working for myself, or
for the business or for the government. ' I concluded that I'm
not going to expand because of the tax. The city has just
increased their personal property tax four times in the last
year. There is just no incentive to buy good equipment any
more because they will just tax me on it. Actually, I have
decided that I'm probably better Off buying junk if it is
usable or if it is possible to fix it up. Then too, with the
state government they passed the sales tax on me and now
they're fiddling around with that and I don't know what is
going to happen there so I can't plan ahead. You have to
borrow money and mortgage. I know what is going to happen
with the city. It is just going to continue to get worse and
worse so I have decided that I'm just not going to expand.

I would like to sell, and actually the time to sell is when the
business is going good. Then I could let the next guy get the
increased tax.

In summary, the C-E does not want to expand his operations

too quickly or become too large because he fears he may lose

control Of his business. He fears that the banks may gain control

or that the union may force its way in and destroy the family relation-
ship he has developed with his employees. Another deterrent to
growth is his belief that, since the government will siphon Off a
significant portion of any increase through taxation, the added problems
Of rapid growth will be greater than the gains. He also fears that tOO
much growth will leave him with less time to devote tO the plant and
production problems where the "real work" is done. He will be
forced to become more involved in administrative details and with
outside institutions, areas in which he lacks confidence. This fear
is a result Of the fact that he does not feel that he can adequately
handle all Of these demands because they will require skills above
and beyond those of just being a good shop foreman or supervisor.

3. Relationship to External Social Environment

 

The C-E's relationship to his external social environment
is one of low involvement. His family life-style11 is more char-

acteristic of the upper-lower social class than the upper-middle

 

11For the concept of Family Life-Style see David G. Moore

and Norman R. Smith, "American Life-Styles, " unpublished
mimeo or'l'Deyaoping Pattern'of. Consumer Behavior,”N. R. Smith,
Business DevelOpments, Jan. 1963, School Of Business Administra-
tion, University of Oregon; reprinted in Oregon Business Review,
Sept. 1963, University Of Oregon; also reprinted in Journal of CO-
Operative Extension, University of Wisconsin, Spring, 1964, Vol.
II, No. I, p. 45,"Consumer Behavior Patterns.H

 

 

 

 

56

social class. His home is not in the "best" district of his community
but in a district which would be better characterized as upper-lower
or lower-middle. In some cases his family may still be living in
the same modest home they initially purchased in moving to the
community. Neither he nor his wife is active in community affairs.
He has little involvement in the wider community and belongs to
very few organizations. Any organization he does belong to is
directly related to his particular job, such as an association Of tOOl
and die workers, or engineers, etc. However, he does not belong to
this type Of organization to help him in his business. He does not
look upon this association as a method Of gaining businss contacts
which will help him in any significant way in improving his competi-
tive position. He does not perceive himself to be a joiner and in
fact denigrates those individuals he terms "joiners. "

He belongs to very few social clubs. For example, he does
not belong to a golf and country club. Any social clubs he does
belong tO are the type of club associated with particular hobbies he

has, usually fishing, hunting, and other outdoor Sports. In many

 

Also, see Toward Scientific Marketipng, Part IV, The Life Style
Concept. Editor Stephen A. Greyser (Boston, Mass.: Proceedings
of the American Marketing Association, Dec. 27-28, 1963), pp. 129-
74.

57

cases, he belongs to the same clubs as his workers. The essential
point is that his social life is not used to help further his business
organization or business career. He doesn't join clubs that his
customers belong to, nor community organizations which will help
protect the position Of his business in the community. There is a
distinct cleavage between his work life and his home life.

His social life and his family's behavior patterns are more
similar to those Of the skilled blue-collar worker than the successful
middle-class businessman. His family does little entertaining, or
partying, and social activities are mainly "family get-togethers. "

The C-E's children go to a university if they exhibit the desire
and talent. However, they do not go to the high prestige, private
schools prior to college. Nor do they go to the exclusive Ivy- League
college. Rather they gO to public schools and state colleges. This
is not because the C-E lacks the financial means. Rather it seems
to be that private Schools are not considered the apprOpriate pattern
or the necessary. thing to do.

In his hobbies the C-E excludes his wife. His fishing trips
and hunting trips are taken with his male friends. He and his wife
do not belong to the golf club together, play bridge or Ski together.

As one individual said in discussing his hobbies,

58

See these two guns here [he referred to two rifles in
his Office]. Well, I refinished them all myself. I made
the stock and did the refinishing. These guns are quite
Old and actually I have tO make my own bullets. My wife
just can't seem tO understand how I can come home from a
hard day's work at 7:00 at night and then go down into the
basement and spend my evenings working on my guns. She
thinks that I should come upstairs and relax, but to me this
is my relaxation.

In summary the C-E and his family exhibit the patternd a rather quid
private, family life, not highly involved with the social or business
community.

4. Summary and Extract'nn of the Craftsman Entrepreneur

Characteristic Orientation

 

In constructing the ideal typology of the C-E, this chapter
has defined in some detail the uniformities of behavior deemed
to be most significantly representative Of the C-E'S characteristic
orientation in building a company. We can now move tO a somewhat
higher level Of abstraction and look for the essential themes in the
orientations and behavior patterns of the C-E's. The construct
hypothesis evoked by this analysis is: The C-E perceives and
reacts to a limited range of culture. We can derive from this
hypothesis some sub-hypotheses which appear after detailed
analysis. These are:

l. The C-E exhibits narrowness in education and

training.

2. The C-E exhibits low social awareness and low
social involvement.

59

The C-E feels a lack Of competency in dealing with
the social environment.
The C-E exhibits a limited or circumscribed time

orientation. '

CHAPTER IV

THE CONSTRUCTED OPPOR TUNISTIC -ENTR EPRENEUR'

Introduction

 

In this chapter the major attributes of a second constructed
ideal type, namely those of the Opportunistic-Entrepreneur, will
be defined. The uniformities that are deemed to be most significantly
representative of the O-E's behavior in initiating, maintaining and
aggrandizing his company will be drawn from the empirical cases.
The 'methodology and the areas to be analyzed will follow the outline
given in the introduction to Chapter III. Specifically, we will look
at his life history, including his education, family background and
career work experience. We will examine his characteristic pat-
terns of social and business behavior in relation to both internal
organization Of the business and relationship tothe external social
and economic environment.

The C-E and O-E represent polar types. They are defined
in the areas chosen for analysis as polar types representing ex-
treme parameters of behavior and orientation for the entrepreneurs
in the sample. Therefore, throughout this chapter, the O-E will be

contrasted with the C-E.

61

A. LIFE HISTORY AND CAREER PATTERNS

 

1. Family Background and Role-Models

The family background of the O-E in contrast to that Of the
C-E is predominately middle-class. Often the father Of the O-E will
have a small business. The O-E grows up in an environment in which
he is exposed tO and internalizes values Of business and the middle-
class.

In cases where the O-E does have a father who is a skilled
worker, there are others in his social melieu that act as role-models.
The difference between the O-E and the C-E is that the latter is un-
able to 'move on to a new Sponsor or role-model later in life. .In one
case the entrepreneur's father was a foreman for the General Electric
company and wanted. his Son to take a job with the same company and
enter the executive-training program. However, a friend of his
father's was also influential in shaping the boy's education and future
career. The friend suggested that the boy Should go to "State U"
because the engineering school was highly rated. The friend also
suggested that he‘ join the r_igh_t fraternity because it would be very
useful in his career. The entrepreneur stated that he really didn't
have enough money to join the fraternity and took a part-time job

to meet the additional costs. In this case the friend of the father

62

functioned as a role-model and influenced the entrepreneur's educa-

tional choices and subsequent career.

2. Education

 

The O-E is the type Of individual who is Often characterized
as being well rounded. He has more years Of formal education than
does the C-E, but more important than the number Of years is the
type Of education that the O-E gains. Beginning at the high school
level or even before, the O-E is involved in many areas of endeavor.
He is extremely active socially and does well both in the technical
courses and in the liberal arts courses. In many cases he is active
in sports. Often he will be president Of his graduating class and
president of many other organizations. He is successful academically
and graduates at an early age.

An example of the above pattern is shown in the remarks of
one O-E:

Actually my high school time was very active. I don't

know how to say this without sounding egotistical but I'll just
say it and then forget it. I was president of my class for

three years. I was president of the Hi-Y. I was president

Of the National Honor Society. I was also in the Capitol Players
group; also I played football and I was the lightest man ever

to make varsity. I finished high school and then started as a
freshman at Iowa State when I was 17 years Of age.

A Similar pattern at the college level is shown by another

entrepreneur who says:

63

Well in February Of 1945 I came back to "Michinois" to go
back to College on the G. 1. Bill. This made it a lot easier for
me. Also I got into the counselling service. I don't remember
how exactly; someone might have suggested it but I saw a chance
Of doing a job Of counselling. It helped a lot because they gave
me a nice private room with a bath and a telephone. Also I got
my room and board. It was a nice deal. I was one Of the more
affluent students because I had everything paid for by the G. 1.
Bill and the counselling was on tOp Of that.

Interviewer: What associations were you in at college?

Respondent: Well, I don't know how many damn things I was in.

I was president of the men's hall association. I was president of
the Veteran's Association. I can remember I organized a big
dance for the Veteran's Association and we had Tommy Dorsey's
orchestra. It was a real ball! In addition I was president Of the
Independents' Association. Also, I got involved in politics. We
had a big problem getting veterans registered for voting. I worked
on this and we finally did get them registered. I was friendly with
one Of my professors and we worked in the Burgandy area which is
as you know strongly Republican. We must have done a pretty
good job because we defeated the Republican Candidate. Shortly
after that the Mayor of Burgandy wanted me to run his campaign
for him on the campus. I did and I got a little bit Of money out of
it. You know, it is a funny thing, since I got out of school I
haven't been involved in anything. I guess I got a little too much
Of it in school. Another thing, I didn't join these organizations
with the hope that it would help me when I got into business. I
can't see where it has either. I don't have any customers who
were my Old college mates.

The major theme in‘the O-E's educational strategy is one of
choosing a combination of liberal arts or business courses and techni-
cal courses. The O-E may major in law, economics, liberal arts
or creative writing. However, the important point is that no matter
what his major is he usually gains facility with both physical and

conceptual tools which are useful in both technical and administrative

64

areas. If the O-E is not able to go to university he will acquire the
tools or techniques he considers essential by going to night school.
For example one entrepreneur who came from Europe to America
at six years Of age had this to say about his education:

When I was twelve my mother died and I had to move in
and live with my sister and her husband. My father was very
broken-up over the death of my mother and he left and went to
Moto'rdom to work. I can remember that I used to get up at
four in the morning and sell newspapers. I can remember when
I couldn't afford to have my shoes resoled and I used to put
cardboard in the shoe. At the age Of fifteen I got a job working
with the Auto company where my brother worked. At that time
I also enrolled in the company's trade school. I tOOk a tool and
die apprenticeship course and I finished that in 1928. While I
was taking this tO'Ol and die apprenticeship course I was going
to City State University two nights a week. Then in addition
to this I was taking an I. C. S. course. I remember we were
reading the books called "Footprints on the Sands of Time. "
There were seven volumes of these and I read the books three
or four times. They really made an impression on me.

In another case the O-E emphasized the humanities in high
school and business college but got his technical training at night
school and through the Army. He says:

I graduated from high school here in about 1933. Then in
addition I went to the Business College here in the evenings,
and I also took a correspondence course from the University
of Michigan. Most of my courses beyond high school were in
creative writing, English, and so on. As far as formal techni-
cal training I went to night school at the Junior College here
and took an eight months' course as a refrigerator engineer.
Also when I was in the Army I took a formal course at an
Ordinance School. That is about the extent of my formal
education background.

65

3. Work Experience

 

a) Success and Varietj

The O-E has a variety Of work experience in contrast to the
relatively narrow technical work experience Of the C-E. The O-E
gains technical experience but in addition he seeks experience in
areas such as merchandising, marketing, selling, or general ad-
ministration. Even the boyhood part-time jobs that the O-E holds
show a greater variety than those of the C-E.. For example one
O-E who grew up in a small town where his father owned a harness
shop and a shoe shop gave this description:

I worked for my father repairing shoes after school. On
leaving school I got a job as a delivery boy for the local grocery
store. Within four years I worked up to being manager Of this
store. I enjoyed working in the retail store and feel that the ex-
perience was extremely valuable. I found that I could sell and
that I sold all Of my friends Shirts and ties. I learned that in
many cases all I had to do was to ask and I could sell a tie with
a shirt almost every time. Because of my success I was put in
charge of buying clothing for the store. In addition to this I
gained experience in setting up window displays. I put up a
winde diSplay for the town druggist and entered a Bayer Aspirin
contest and got a prize. for the display.

I did other types of work too, such as laying hardwood floors.
I entered a Fischer-body contest for making model coaches and
won first prize in my division.

This particular individual shows creativity in the art world
but he did not limit himself to pursuing artistic accomplishments. He
sought other experiences and gained ability in selling and administra-

tive areas. He was successful in melding his artistic and business

66

talents and subsequently started an advertising and silk-screening
business which today is one Of the largest in the Midwest.

Another individual got his technical education at night school
where he studied technical engineering, drafting engineering and air-
conditioning. However, his job was in the administrative and mar-
keting areas. His work history is as follows: His first job upon his
arrival in Motordom was as "barker" on a sight-seeing bus. He
went next to Sears-Ward and moved through many different depart-
ments until, at age twenty-eight, he attained a level much higher
than usual for his age. He was one of six merchandise managers for
one Of the largest divisional areas. He was at this rank when he
decided to quit and go into his own business.

This pattern of gaining success in a variety of endeavors
is Shown in the career of another O-E. He says the following about
his background:

My family came from Ohio but my father who was a
salesman was killed when I was about a year Old. My mother
came here and remarried when I was about five or six years
Old. Then when I was in high school she got divorced. I have
one half-brother who is younger than I am, and he is a machin-
ist inspector. My stepfather was a manual laborer. After my
mother was divorced, and I was going to high school, I worked
in a woman's dress Shop to help the family. After I finished
high schoolin' 19331 get a job with the B 8: B grocery chain,
and stayed there about six months. I left for a better job with
a textile company and I worked in the stock room for about

two and a half years. Then I went from there to "American
Appliances": and started as a stock chaser. After this I got

67

a job as night-production follow-up man. However, 1 was hurt
at work so I was put in the receiving department. 1 went to

the Northern Appliances engineering school at night. On com-
pleting this course I went on the road as a service representa-
tive. I was on the road for about six or eight months and travel-
led the whole Southwest--Texas and so on. I was with the com-
pany for about two years when they closed down completely for
about three months. I signed up for unemployment and after I
had taken all Of the tests they Offered me a job there. I took the
job as clerk with the unemployment commission. I worked there
for about eight months and I went up a couple of steps while I
was there. Then I moved to Auto Town with a paper company

as lab technician and stayed there about nine months. I left
there because I didn't like the town and moved back here. I

got a better job at "Bowling Inc. , " and actually I used my con-
nection with the "memployment commission, the compensation
girl, to get this better job. At any rate, when I went with
"Bowling Inc. " I started as a cost clerk and I worked my way

up until I was the head of the cost department and chief industrial
engineer. By the time I went in the Army in September 1943, I
had all of the cost department; I was plant processor, time-
studies, layout, tOOl designers and a lot Of other things. I was
right under the Assistant's Work Manager. I guess I was about
third from the tOp in the company.

I went into the Army as a private in ordinance and ended up
as a first lieutenant. Actually my Army experience was fairly
interesting. I went to technical school and took a two year's
course in applied optics. We covered this in about ten weeks.
Then I went to O. C. S. in ordinance and came out as a second
lieutenant. I was then sent to the Midwest ordinance district
and took a job as head of research engineering and development
in the artillery section. I had to cover all Of the Midwest except
one state and had all of the research and development contracts
to handle. This was a pretty big job and I was in every major
company and college in that area. It really enhanced my edu-
cation. I had a lot of Officers under me. I was head of all
four sections of ordinance in production and research. There
were individuals high as lieutenant colonel who were under
me. I was discharged in 1946. However, just before I got
out the Department Of Commerce contacted me and a week after
I was discharged I was made a scientific consultant for the
Department of Commerce in wood and wood-pulp industry and
sent to Europe. I didn't know too much about wood and I was
a little lost but I did it anyway. I was there about six months

68

and had an honorary rank Of colonel. I was stationed in Germany,
and travelled the Netherlands, Austria, and Germany and so On.

I spent a pretty busy time. I went into most Of the German in-
dustry. Actually I got into and discovered some data that we
weren't aware of at that time. We didn't even know it existed.

(It is common knowledge now.) While I was there 1 also got

into some metal working on my own volition. When I got back

in 1947 I went into a company with a fellow in consulting for the
wood-working industry. I worked on this for a while until I got
into my present company.

Here we see a broad range Of different types Of jobs. This
individual worked in a woman's dress shOp and in a B 8: B grocery
store. He worked as a clerk in an unemployment bureau and as a
lab-technician for a paper company. He worked in many departments
in a manufacturing firm and also dealt with research firms and col-
leges in a liaison or consulting capacity. He also dealt with business-
men of foreign countries while in Europe. In all of these areas, he
.was able to deal with the problems effectively. A great degree of
flexibility and a broad perspective is required to accomplish these
many different jobs in an effective way. Compare this kind of suc-
cess theme to that Of the C-E whose success is in dealing with things
or processes. Even if the C-E is in a tool and die shop in South
America, his problems are no different than if he were located in
Gary, Indiana, or at least he does not perceive that his problems
might differ i'n.these two different locations.

b. Becomipg a Chief-Executive

The O-E stays with a particular job until he feels he has

69

accomplished his goals. He is oriented to his role-model or sponsor
and stays with him until he perceives that it is the strategic time to
strike out on his own. For example, in a number Of cases, the O-E
decided that he had advanced as far as he could within his present
position because of the age Of the people above him, and SO he de-
cided to start his own organization.

In a large number of cases the O-E works as executive assist-
ant tO someone who is well known in the industry. From this associa-
tion, the O-E gains a great deal. One respondent, in relating his
background, says:

Well, I was born in Seattle, Washington, or a small
town just. outside of Seattle. I actually grew up and went
to school in Seattle. My first job was as a whistle punk.
DO you know what that is? [So he explained exactly what
he did.] "Well, I was ten years Old at the time. What
you dO---the logs are pulled out at the end of a steel cable.
This cable is attached Onto a drum. What I would do is,
whenever the cable is hooked onto the log, I would pull the
whistle and then the Operator Of the drum would know that
he could start hauling it in and he would haul it in. Well,

I worked at this for about nine hours a day, had to walk
four or five miles to work, and I got 50 cents a day for it.
This was my first job.

In school, I went to a one-room country schoolhouse
actually in this small town outside of Seattle and then went
to high school in Seattle, and in school I skipped two grades.
Really the only reason I went to high school was that I was
interested in softball. I used to play a lot Of softball, and
so that's why I started high school.

AS far as my ancestors are concerned, well, my
mother's it's a combination Of French and German. As
far as my family life is concerned, actually, my father
would work at the job until he went into this Shingle business.

70

My mother was against it terrifically. She fought him.
She didn't want him to give up the security of a steady job
and go into business. As a matter Of fact, they fought for
10 or 20, 30 years afterwards. SO, my father would just
sort Of retreat from us. He would leave and be gone for
two or three months at a time. We were a poor family.
We didn't starve to death, but we were poor.

I graduated from high school when I was 16 years Old.
My first job was that Of a carpenter and this Old fellow who
headed the contracting company, we got to be good friends
and I used to gO over to his house nights and learn taking
the plans Off so by the time I was 18, I was his foreman.
This was 1924. Then, I decided that I wanted to go tO the
university. SO actually before I could go back to the univer-
sity, I had to return to high school for about six months and
repeat the, last part to get ready for university. Then, while
I was going to university I went into house building with my
father. Actually, Iwas abetter carpenter than my father.

He had learned carpentry late in life, so he used to do the
outside of the house, and I would do the inside finish work.
So, I was running this business while I was going. to univer-
sity in Washington. I registered in civil engineering and
things were pretty rough at that time. They used to really
weed them out. In my sophomore year I Started second in
my class and then by the end of the term, I was right down
near the bottom. About this time we had during the term--
the businessmen would come in and talk to the class, and
they would tell us, 'Well, if you are lucky when you finish,
you might get about $125 a month as an engineer, probably
more like $85 or $90.’ Here I was already making $100 a
week. Well, it seemed that I just couldn't handle this engineer-
in'g and run the business, too, so I switched to liberal arts.
I took about---I can remember taking one term of psychology.
This was in '27, and I'm a pretty good psychologist. SO,

with the pressure of these things I had to leave school.

Then I went full time into the business. However, what
happened was this. On December 28 I got married. That
would be 1928---December 28, 1928---December 28, 1928.
When I came back in January, 1929, we were brdc, because
you see the depression started out on the West Coast a lot
sooner than it did down here. So here I was broke. I went
away on my honeymoon with lots of money and good business
going, and when I came back in January I was broke. So,

I got a job as a carpenter from my Old bOSS---the person I

71

had first worked under as a carpenter. He had a number of
carpenters working for him, about seven or eight of them.

Oh, no, more than that. But he had a number Of carpenters
who had been supervisors for him. We were building houses
and it was pretty tough to get a job in these days, but we kept
on. I got sort of disgusted with this house building thing be-
cause we built, for example, we built a great big expensive
house and we built it exactly the same way as we would build
a cheap house, and I felt that it was just wrong, that they
were making no advances whatsoever. Actually, I was going
to sort of save the world. I had a lot of ideas about prefab-
ricated housing that I had gotten from reading Fortune and
other magazines, and I felt that I could help to revolutionize
housing. Actually, before leaving this job---because I got
disgusted with the way houses were built---I felt pretty good,
because here I was a pretty young fellow and I kept my job. I
was the fifth one to leave and'l suppose that the final reason
was that I dropped something on my foot and broke my toes.

In those days, what they would do, they would lay off accord-
ing to ability. That is, usually the last ones to go would be
the better or the best carpenters. It was just sort of the
ethics of the situation. I was the fifth one. Everyone had been
laid Off and there were five of us left and I was one of these,
so this made me feel pretty good, because I was still fairly
(young at that time. At any rate, when I quit here, we scraped
up some money-'—-there was my mother, schoolteacher sister,
and myself---and we all took a trip to Chicago to the World's
Fair in 1933.

I started looking around at the prefabricated housing.
Within about a half an hour I realized that they did not know
what they were doing. None of them were well built at all.
They were just slapped together. But, there was one---it
was a "Jones" house---that had the framework of the house
made Of structural steel, and this intrigued me a little bit.

‘ So, I asked the guy at the display about a job. And, he said,
'Well, as a matter Of fact, there is a job available.‘ Apparently
somebody had just been fired or quit. SO, I got a job with this
company. SO, I came to the East and worked for "Jones Steel,
and I ended up being an assistant to A. A. Jones. We sort Of
hit it Off together and I used to follow him around the country
and help him with his drinking and his chasing of women and

all the rest of it. Actually, this is when I got my Master's
degree in marketing. It was a four-year education I got.

72

I traveled nationwide. In this way I learned nationwide
marketing. And, Old Jones was a real genius, didn't

have much education and sort of hard to work with, but

a terrific teacher and I was actually attempting to build

up a market for this Jones steel in the prefabricated house.
Actually, at this time my background was rather unique
for this job. I had civil engineering and carpentry, and I
had some sales experience, too. SO, I guess there weren't
tOO many around like me. In the four years that I was with
them in this Operation, we spent $400, 000 trying to get it
going and in actual sales we only received about $100, 000
back. By the time I left---actually, I was fired and quit

at the same time---l was sales manager. and executive
assistant to Jones.

The job history Of this entrepreneur indicates his ability to
change role-models when it seems expedient. It should be noted that
in his first job as carpenter he soon gained the confidence and friend-
ship Of the head of the contracting company. Because Of this, he was
able to learn additional skills so that by the time he was eighteen he
was foreman. He states he was a better carpenter than his father,
so apparently he did not consider his father as an adequate role-
model. Soon after entering the steel company he achieved the position
of assistant to the top man in the organization. In this position he
gained a great deal Of experience and exposure to the industry. Later
on in his career this O-E joined his former boss as a partner and they
formed a new company. However, this did not last very long and the
O-E left to start his own company so he could be in sole charge.

This sponsor, role-model theme is evident in many cases.

The close association with a top executive is one way in which the

73

O-E gets to know top management in other companies. With these
contacts the O-E is very effective in building long term relationships.
However, in some cases, the O-E may get this interaction with tOp
management or other companies through a different method. In some
cases O-E's were able to get to know the leaders Of an industry
through their jobs in the Army during the war. In one case the
individual was called into the Army in 1941 and spent his time in

the Army in tank testing. He was successful and gained the rank of
major on discharge. He describes his work history as follows:

In 1940 I graduated from IowaState with a B. D. degree
in Mechanical Engineering. Naturally, I went to work for
Massive Electric, When I went with them I was supposed to
be on a training program for eighteen months but after four
months I was promoted into the engineering area. I was the
first one in my class to get a job like this. However this
figures when you realize that I did have connections with
Massive Electric and my father and I knew a lot of people
and they knew me.

Then in August, 1941, I went into the Army. This was an
interesting situation. The Army had the names of twelve people
who work for Massive Electric. I was working in the engineer-
ing laboratories in the East at this time. Well, anyway, they
cameto Massive Electric and said, 'You boys are in the Army.‘
Massive Electric raised H--- and tried to get us out of it but
they just couldn't. The Army phoned me on a Monday, and the
following Friday was supposed to be my wedding day. The Army
said, 'You're in the army now; report to West Point in two days.
It doesn't matter how you get there---fly, drive, or what.‘ I
didn't like this. I've always been a bit Of a rebel anyway so
I told them to go to hell! Within a half an hour there was a
Major in my Office and the Major really laid it on the table.

He said, "All right, you are going to go there, or I'll put you
under arrest right now.‘ Well, naturally, I went.

I went through West Point and then I was sent down to
Aberdeen, Maryland. I was in the ordinance division for

74

five and a half years. When I was discharged it was with
the rank Of major.
About four months after I was inducted into the Army,
1 got married. At Aberdeen, Maryland, I was in tank testing.
When we started out we had only wooden mock-ups. We
didn't even have a metal tank. I did this for a while but finally
had to be taken Off because Of health. The point is, you get a
certain amount Of carbon-dioxide in your blood and once you
get to a certain level you can't take any more without perma-
nent damage. I was then moved to the Midwest and worked
until my discharge.
In the Midwest I was dealing with all the top people in
the industry. In looking back on this, I couldn't have had
better training because I got to know the top people--peop1e
who would have taken me twenty years to meet. Actually,
during the war, while I was in Auto Town I met this fellow
who was working on this new patented equipment. That is
how 1 got into this business.
After I was discharged I went back tO Massive Electric
in the East but I didn't take the job I was supposed to take. I
turned it down. My father was mad because, from his stand-
point, the biggest thing in the world would be to sit in an Office
in Massive Electric in the management group. Instead,
I took a franchise for this equipment that a fellow had. My
father thought I was crazy but the way I felt if I didn't try it
then I never would. We only had one child at that time and I
felt that with more children coming along if I didn't do it then,
I never would get around tO it. When I was discharged I had
‘ 500 dollars and a 1937 Chev. and I started out on my own.

In another case an individual had been a practicing lawyer
for twenty years and had written a book on corporation law. By the
time he started his ownfirm he knew many of the top people in
business in his community and interacted with them socially and in
business situations. NO matter what route he follows, the O-E,
through his work experience, gets to know the top management in

different firms and different types of industries in his local area

75

and throughout the country. This is in contrast to the C-E who gets
tO know peOple primarily in the work world, that is, in the plant. The
C-E builds his reputation in the technical-plant world in contrast to
the O-E who not only has the technical competence but also gets to
know the top administrators Of many companies. The O-E is per-
ceived by himself and others as being a Mbusinessman, and there-
fore he can transcend industry borders. He has talents and skills
that are applicable to a variety Of types of businesses and not just
useful in one type Of industry such as tOOl and die making or sand-
paper making. In contrast, the C-E is industry oriented. He gets
his work experience, training and background in one particular in-
dustry and feels forced to continue in the industry in starting a firm.
The O-E is community oriented or even nation oriented and does not
feel limited in starting a business to the particular industry or com-
munity in which he gained his experience and early work training.

c) Identification with Management

 

From the foregoing discussion it is evident that the O-E has no
problem of deciding whether to identify with management or to identify
with the union. The O-E is not a marginal man as the C-E Often
appears to be. (The term marginal man in this context is used to
indicate the individual who does not identify with either management

or the workers.) The O-E is oriented to management and identifies

with top management. Therefore, when he starts his own company
he does not have the problem Of being unable to withdraw his identi-
fication from the workers as is the case with the C-E.

(1) Summary

In summary, it can be seen that the O-E gains varied work
experience in his career. He proves himself to be competent in
the technical area Of his particular firm and, in addition to this,
shows himself to be competent in the broader administrative aspects
of business. The work world which he perceives to be relevant to
himself and career is much broader than that perceived by the C-E.
His success theme is also much broader than that of the C-E. He
gains success in varied endeavors or fields rather than just in the
technical work world as is the case for the C-E. In comparing job
tenure, the O-E does not exhibit the job-hopping pattern of the C-E.
The work experience of the O-E prior to starting his own business
seems tO‘ serve a number Of functions. On the one hand he develops
his technical competence and also his administrative competence.
In addition he builds a reputation for being a bright young man and
has the opportunity to relate to top management in many firms. This
is, of course, very important to his success when he starts his own
firm. However, in initiating his own firm he is not limited by his

previous work experience. The O-E will initiate a company in an

77

industry in which he has no previous experience if he considers it
expedient. This behavior is in striking contrast to the C-E who

never transcends industry borderlines in initiating his company.

4. Circumstances of Initiation: The Early Dream

In contrast to the C-E, the O-E has a long range plan to
initiate his own business. He does not suddenly decide to initiate
a company because Of a unique situation or set Of circumstances.
Rather, this step is something that he has long dreamed Of and done
much to prepare for. His conscious pursuit Of a broad education and
broad work experience is a means to an end and not an end in itself.
Breadth in education and work represents one aspect of gaining the
necessary experience, knowledge and contacts to be successful in
launching a business.

One O-E describes his early dream this way:

When I was a boy I always had a dream. My dream

was to have a little Show card shOp all of my own. I

could just visualize it. I could picture this in my mind.

I could just see myself sitting at the desk taking orders

on the phone, delivering them, and so on. Now in order

to do this I had to learn some things so I used to do letter-
ing. I had to learn how to do this and that is why I got into
display work with the druggist in town. I set up his window
displays for him. Also, I did lettering in the retail store
where I worked. Another thing that helped me gain ex-
perience was that I had to sell everything in the store. I
saw this as a challenge. I found that I could increase sales
by just a little more effort. I can remember some of my
friends would come in to buy a shirt for a Saturday dance---

78

Of course about half Of them would gO to the dance without
a white shirt. Anyway, I would put the shirt on the fellow
and I would say, 'Now how about a tie?‘ He would say,
'Well, I have lots Of ties.‘ 'NO,‘ I would say, 'You don't
want to use just an Old tie. ' (They usually had just some
Old greasy tie.) SO I would ask the color of the suit and
pick out a tie and say how nice it was. I found 1 could
increase sales a lot this way.

Here is an example Of an entrepreneur who had his dream very
early and went on to pursue it in the face Of many difficulties. How-
ever he did not let his dream remain that Of a little card shOp. He
was able to enlarge his vision as he gained experience until today he
has a manufacturing company with sales of over a million dollars a
year. However, it is important to note that he had his initial dream
early in his career. He consciously sought out and gained varied
experiences in different types Of jobs as a means to accomplishing
his dream. Contrast this to the C-E who perceives gaining ex-
perience and expertese in various types of technical work as ends in
themselves. To the C-E these activities represent proving to himself
that he can master any type of work or any machine built by man.

Another example Of the early dream is that Of the individual
who decided that he was going to make a million dollars. His aim
was not to prepare for a particular type of industry but to make a lot
of money. He describes his childhood as follows:

I grew up as one in a family of four children. My mother

was Scotch and Irish and my father was two-thirds Indian.
He was a small sawmill<operator in town. I can remember

79

going hungry many times during my childhood. We lived in
sort Of a tar-paper shack and newspapers were used for
wallpaper in our house. I loved my mother and father but
I determined early in life that I was going to get away from
home and earn at least a million dollars.

After graduation from high school I went to "Machine Town"
to seek my fortune. I arrived in 1938 with twenty dollars

in my pocket and holes in my pants. I talked Auto. Corp.
into giving me a job and I went through their institute Of
technology. I intended to go through their entire school
system and I did. In the company itself I held jobs in prac-
tically all Of the departments in the corporation. 1 was in
production, production-planning, administration, purchasing,
jobbing and so on. I took every course available at the in-
stitute. Actually, I am a graduate engineer Of theirs. My
intention was to learn everything I could about big business---
how it Operates and how it runs. I wanted to learn every-
thing I could from them in the time I was there. However,
all this time I had every intention Of leaving them and getting
out on my own. In order to do that I lived very frugally and
by the time I left Auto. Corp. in 1943 I had saved up $7, 000.

Here again we see the pattern of the O-E gaining as much .
varied experience as possible as a means of insuring success when
he starts his own business.

We saw that, for a C-E to start his company, usually some
crucial event or unique circumstances act as a catalyst and cause
the entrepreneur to finally make the decision to go out on his own.
For the O-E, no crucial event need occur. Rather, he precipitates
events when he consciously decides the time is ripe. An example
of this conscious choosing of the right time can be seen in the case
of the individual discussed above. In explaining the circumstances

leading up to the initiation phase Of his company, he says:

80

After being at the Auto Corp. and saving up the $7, 000

I left in 1943. By the time I left I had determined several
things. One .wasthat there was a pent up demand for auto-
mobiles. At the same time that I was working for Auto.
Corp. 1 embarked upon a series of studies on the Operation
of dealerships and from this I got some Of my own ideas as
to how a dealership should be run. Therefore, in 1943, I
was able to get a franchise for a dealership in the Detroit
area. I spent 1944 and 1945 building a building and getting
established in business. I also embarked on a marketing
program and used a number Of gimmicks to increase the
service business. You see it was my contention to conduct
the affairs Of the service department of the franchsie so that
the profits from it would pay for the Operation of the entire
dealership and the profits from the sale Of cars were gross
profits for the business. I did achieve this level of Operation
and was actually cited by the Auto Corp. as running the finest
and most profitable dealership for its size in the country.
However, I soon realized that the demand for automobiles
would slacken Off as soon as deliveries caught up so I at-
tempted to diversify my holdings so that I would be able to
eventually unload the dealership. I started to do this in
about 1948 and I sold Off the dealership and it was concluded
in 1950.

From his explanation, it is apparent that he consciously
planned for the future. He felt he could visualize what would happen
in the future and so he took the necessary steps to be prepared to
move at the opportune time. The O-E does not just react spontan-
eously to a previously unforeseen Opportunity as is the case with the
C-E.

The C-E does not burn his bridges behind him. In starting
his new company he still continues to work at his Old job until his
new company can support him. The O-E burns his bridge; he makes

the decision to start his company and then quits his job at once.

81

However, as indicated above, he has looked into the new industry or
organization and has done some concrete planning before he acts. In
a sense, he has built a new bridge long before he quits his job so
that, even though he burns his bridges behind him, he is at the same
time stepping out onto a new and better bridge.

Another example Of this long-range planning pattern can be
seen in the following conversation Of an O-E:

After going back to Sears-Ward CO. , I became a mer-
chandising manager. Actually, I was one of six in the "Auto
Town" area. I was holding quite a high position for my age.
Within a year's time I decided to quit and do something else.
When the company found out about my intentions they tried to
persuade me to stay. Actually, I was the youngest man in the
position and they had plans for me they said. I suggested
that unless I received a 50% raise in salary I wouldn't stay.
Well, in response to this they Offered me a 25% raise, but I
said I didn'twant to quibble with them, So, in 1948, at the
age of 28, I quit Sears-Ward. Everyone thought this was kind
of strange because I was one of the highly paid officers of the
company. Besides my salary, I was making four or five thou-
sand dollars a year in commissions. NO one could understand
why I wanted to leave. However, years before I had decided
that there was a great potential in the aluminum business. I
learned a few things about aluminum and I felt sure myself that
there was something definite to sell. Aluminum at that time
was in such raw Shape that I felt there was room for tremendous
improvement. The way it was then, it was a raw material that
you couldn't sell. What type of product can you sell when it is
raw? _

Actually, when I was with Sears-Ward, I kept myself in touch
with all sorts of information. Even when I was buying things for
the company I used to Obtain all the figures and facts about the
products and then I would make my decision. Because I worked
through a number Of departments with the Company I became
acquainted with aluminum products. One thing I realized was
that there was a tremendous possibility :‘bf painting aluminum.
As a matter Of fact, in 1947, I-Wrote a bfochure--Sort Of a sales

82

manual type Of thing which explained the possibilities of
painting aluminum.

Again we see the pattern of conscious planning long before
the decision to strike out on one's own is made. Consequently, when
the O-E decides the time is ripe, he already is equipped in terms of
knowledge and familiarity with the industry he chooses.

In summary we can Say that the O-E has an early dream Of
starting his own company. However he does not idly dream Of the
future. Rather he vigorously pursues the type of education and work
experience essential to the accomplish-ment Of his dream. Also in
contrast to the C-E, there is no critical event which acts as an un-
expected catalyst bringing about the decision to go into business for
himself. Rather, the O-E chooses his own time and is prepared to

move when he decides the time is right.

B. Characteristic Patterns of Social andBusiness Behavior

 

In this section we will describe the O-E's characteristic
behavior patterns in three major areas: first, how he develops the
internal organization essential to the accomplishment of his goals;
second, how he relates to, and involves his company with, the ex-
ternal business environment; third, how he involves his company and
himself with his external social environment, specifically with the

local community in which he and his company reside.

83

1. INTERNAL ORGANIZATION
"‘ a) Relationships tO Employees

We noted that the C-E is paternalistic and believes that his
employees are somewhat childlike. We noted also that the C-E is
ambivalent towards the union since he feels that he is still a member
of the work score in spirit if not in fact. With the O-E there is no
ambivalence towards the union because the O-E never does identify
with the union. From the start of his work career he identifies with
the management point of view, and views his workers in an objective,
unemotional and non-personal way.

These findings are very Similar to the conclusions of W. E.
Henry in his study of successful big business executives. He states:

In general the mobile and successful executive looks to

his superiors with a feeling Of personal attachment and
tends to identify himself with them. . . .

On the other hand, he looks to his subordinates in a
detached and impersonal way, seeing them as "doers

of work" rather than as people. He treats them im-
personally, with no real feeling of being akin to them

or of having deep interest in them as persons. It is as
though he viewed his subordinates as representatives of
things he has left behind, both factually and emotionally. 1

The O-E is psychologically removed from his employees in that

he feels it is his responsibility to evaluate them in an objective way:

 

1W. E. Henry, "The Psychodynamics of the Executive Role" in

Industrial Man: Businessmen and Business Organizations. Edited by
W. L. Warner and Norman H. Martin, (New York; Harper 8: Brothers,
1959). pp. 24t34.

 

84

He is sympathetic to their problems; however, "If they don't mea-
sure up, well then out they go. "

An extreme example of this impersonal Objectivity or lack Of
emotional involvement with the workers is shown by one O-E who had
recording equipment set up in his Office. This was designed so that
he could record conversations Of his employees anywhere in the plant.
He had pick-up microphones located in every part Of the plant includ-
ing the men's and women's washrooms. He said that he used this in
dealing with employees during labor union troubles. However, he
felt that he was very fair to his employees because "Twice a year I
take my financial statement to my workers in the plant and show them
sales, profit, and bonus and then distribute the net profit accordingly. "

The O-E does not want a union in his plant and in this he is
similar tothe C-E. However, the O-E has a different reason for re-
sisting the unionization of his company. His reason is impersonal,
objective, and unemotional. He resists it because he feels it will
inhibit the ability of his company to compete effectively and maintain
steady growth. In contrast, we saw that the C-E's reasons are more
personal and emotional. He resists unionization because he feels that

the union is somewhat Sinful, because it lessens the ability of a good

man to turn out a good day's work for a good day's pay.

85

b) EmpIOyee Hirirg Criteria

With the C-E the major criteria used in hiring an individual
were based on particularistic values. That is an individual is hired
because he is personally known to the C-E or at least known to friends
of the C-E. The C-E has to have this information before he feels that
he can really trust a man.

For the O-E complete dependence upon particularistic criteria
is not essential. He does not have to have known the individual for a
long period Of time or have gained personal information through a
close friend. He feels capable of evaluating the potential of individu-
als and making his own decisions. For example, one extremely suc-
cessful O-E discusses his selection of men as follows:

Well, fundamentally my basis for selecting good men is some-
thing like this. I'll run across a person somewhere in my

travels and I'll interview him casually but not make it a formal
interview. Then I'll make a point not to see this person for
somewhere from three to Six months. Then again I'll interview
him in an informal way and attempt to assess and evaluate the
movement or change I can detect Overtthat Span of time. I want

to see if the man has matured any and sharpened his intellect and
so on. Now I recognize that there are fundamental differences

in the lobes of a man's brain and also in his ability to use them.
For example, my Executive Vice-President who seems to be the
man in line to take over the company as President is only a high
school graduate and a draftsman. This is a fellow I came across
and I was quite impressed with his where-with-all. Actually what
happened, I eventually went hunting with him and during which time
I whetted his appetite and picked his brain in an attempt to evaluate
him. And, I sat down and played checkers with this man. I have
done this with all the other men that I have hired for key positions.
In playing checkers with these peOple I put them under pressure

86

. because, first, they don't know whether they Should be out
to defeat me or whether they Should just sort Of lay back
and let me win. Now I am not really concerned with that
except to watch them under pressure. Now the second
thing is that I can tell from the way a man plays checkers
what his ability is to see the whole board and to see that

in playing checkers the checker positions can be moved in
all directions. Now what I am looking for is whet her a man
can understand the strategy Of playing the whole board of
checkers at one time and that he can jump in various direc-
tions at the same time. Now I find this a very useful tool
in evaluating a person and I feel it has been extremely helpful
to me.

The above discussion is concerned with hiring for managerial

levels. However, even in hiring individuals for the plant universalis-

tic criteria are used by the O-E.

The particularistic criteria for hiring workers are functional

for the C-E since they are related to the fact that the C-E tends to

depend upon price, quality and personal service to compete in his

particular market. In contrast, the O-E can compete in many ways,

such as new products, superior financing or a more efficient mar-

keting organization.

c)‘ Plannin and'Dele ation

In contrast to the C-E, the O-E does not feel that he has to

 

2 . . . . .
Functional 1S used here In the Mertonian sense---"Functions

are those Observed consequences which make for the adaption or ad-
justment Of a given system. " Robert K. Merton, Social Theory and
Social Structure, p. 51.

 

87

be cognizant Of all the details Of the organization. He moves as
quickly as possible to the point where he can turn over the routine
day-tO-day activities to competent management personnel. He wants
to get individuals who are willing and able to take responsibility onto
themselves. He looks for people who are responsible, whereas the
C-E looks for people who are passive and dependent.

The O-E delegates authority in many different ways. For
example, one O-E had one Of his plants in the Mich Town area com-
peting with another one of his plants in Wisconsin on the basis of
price for a contract with his third plant. Another O-E decided to
spend his time on research and develOpment of long range planning,
so he moved out of his plant into a new building and turned the man-
agement Of the producing organization over to the executive team that
he had developed. A third O-E made the observation that his organi-
zation was run so smoothly that he could leave it for three months
and it would not miss him.

The above examples are in sharp contrast to the C-E who
feels that he is really delegating authority when he takes Saturday
and Sunday off once in a while.

The desire to delegate routine matters is appropriate for the
O-E Since his concern is with the total company and not with just the

product or process. The C-E cannot delegate as easily because his

88

main goal is to turn out the best product at the lowest possible price.
. He limits his aspirations and consequently does not feel that his com-
pany should grow. He does not need to develop an organizational

vehicle which will free him from routine day-to-day details.

2. RELATIONSHIP TO EXTERNAL ECONOMIC ENVIRONMENT

 

a) Capital Suppliers

There are many different ways that the O-E amasses suf-
ficient capital to initiate his business. The factor that differentiates
the C-E from the O-E is that the latter has less fear of outside con-
trol. Therefore in Obtaining capital he will seek out any possible
source. He does not fear control by banks nor dOes he fear the
resultant control if he sells equity stock in his company. He is con-
fident that he can learn to deal with outside individuals effectively.
Since he is not fearful of outside capital this means that there are
many more potential sources available to him. In contrast, the C-E
limits himself to getting money from personal friends or relatives
if more than his personal savings is required.

One O-E was able to get his initial start through borrowing
money from one of his professors at a university. Later when he
needed additional capital he was able to borrow it through an acquain-

tance he had met during his Army career. The father of his Army

89

friend was relatively wealthy and the O-E perceived him to be an
additional source Of capital.

Another O-E started on the entrepreneurial road after World
War II by becoming a franchised dealer for a new metal-working
product. Within three years he sold this francised business for
$5, 000. 00. This enabled him to buy into the factory that owned the
franchise. Within a fairly short period of time he and two Of the
other partners bought out the fourth partner. Then, ultimately, the
third partner pulled out leaving our O-E and one partner. The O-E
now owns only 10% Of the total stock but states that this gives him
control since he has arranged it so that the remaining stock is spread
among three thousand small stockholders.

There are many other ways the O-E gains the necessary
capital. However, the significant point which differentiates the O-E
from the C-E in gaining necessary capital is the fact that the O-E
sees many possible sources. He does not restrict himself to only
two sources of capital, personal savings and money from relatives
or friends. The O-E does not hesitate to approach Other people and
is quite effective in convincing them that he has an excellent proposi-
tion to offer. Because of his broader perspective he is aware of
these many sources of capital. He feels that he can use these

sources without fear of losing control of his company.

90

b) ' MarketinLand Selling Strategies

The O-E approaches the area of marketing in an active rather
than a passive way. He recognizes this area as being very important
and one that he can control tO affect the posture of his company in the
marketplace. He can manipulate his company tO bring it into adjust-
ment with the market, but he does not feel restricted to adjusting his
company to the independent market forces. Rather he feels that to
a limited extent the market can be adjusted to his company; he can
tO a small degree convince his buyers to accept what he wants to
produce.

The foregoing idea Of treating his market as something that
can be manipulated or affected is Shown in the product development
policies of one entrepreneur. After much resistance, he convinced
the stove manufacturers that their consumer, the housewife, would
really prefer windows in the front of ovens even if she did have auto-
matic controls. He said:

Well, I saw a big future in windows in oven doors. Sure,

at first they thought that with the electric stove, the people
could time it automatically and they wouldn't have to look,
but you know women, they just have to know what's going on.

In another case the O-E developed a method Of painting

aluminum doors and windows and then devised strategies to get con-

sumers to accept them. He also instituted a policy of packaging

91

doors and windows which allowed them to be shipped by rail. He
describes it as follows:

Back in 1945 and 1946 I realized the potentiality of the
aluminum business. I learned a few things about aluminum
and I felt sure that there was something definite to sell.
Aluminum at that time was in such raw shape that I felt there
was tremendous room for improvement. Such a raw product
you can't sell it. After all, what can you sell raw? Anyway,
in 1947 I wrote a brochure on aluminum---sort of a manual
for salesmen and I explained the possibilities of painting
aluminum. Of course, I have done this. Another thing that
I think I have done to improve my products and services is to
pack the glass doors and windows for shipping. When I tried
that everybody thought I was nuts. But I packed those doors
and unloaded them out Of the third floor Of our plant here.

When I did that I was one Of the few guys who could do it. You
know, this colored aluminum is really going. Our total sales
were up 25% last year and the sales of colored aluminum were
up 50%. I'm convinced that people in the aluminum business
just aren't very smart. I went to a manufacturing show in

New York in 1959 and there were about 38 manufacturers in the
aluminum line of doors and windows, and in 1960 there were
Only 19 left. Out Of this 19 only three were doing painting jobs
on aluminum; and most Of their jobs were pretty poor quality.
Actually this is quite natural because my equipment is very
expensive. It is worth about a quarter of a million dollars.

Of course, in painting aluminum I use the technique of having
positive and negative charges on the aluminum and on the paint.

Actually the manufacturers Of electrical equipment for the
Auto Industry don't know how to solve some of the problems which
existed on that type of equipment. When they came here and they
saw my operation g'oing they were really surprised. One of the
engineers said, "Well, God damn it. . . "

Actually in the Auto Town area I have six salesmen. Two 'of
these do direct selling to the homes. I have found that we have
had to sell direct to the homes on the painted doors and windows.
This has been necessary because when I came up with the idea
of painted aluminum no one had the courage to buy it. I had to go
out and do some consumer selling on my own. We actually set
up sales Offices right here in the plant to sell to the ultimate
consumer. In the beginning people thought that it wouldn't work
out. They were sure it would be a flop.

92

In the above example we see the situation of an O-E going
ahead with what he feels is right even though everyone in the industry
disagrees with him. He proved that he was right in his packaging
methods and also in coloring aluminum. However, he met so much
resistance he had to use an alternative channel of distribution because
the traditional channels would not accept this new idea. He had to
sell direct to the ultimate consumer and build up "primary" demand
for painted aluminum doors and windows before the traditional
channels would accept them.

The distribution policies Of one O-E give us another example
of an active and innovative rather than passive approach to the mar-
ket. This case occurred shortly after World War II when there were
shortages of most products. At that time many manufacturers dealt
only with the large central distributors or circumvented the whole-
saler and sold direct to the retailer so as to gain higher profit
margins. In contrast, the strategy of our O-E was to ration products
equally to many small distributors throughout the country. This
enabled him to build a national mass-distribution system. He says:

At that time, it was easy to sell, so I decided that I

would set up a national distribution system and I would go
around and hit all these small towns. (These poor whole-
salers in towns, they were Sitting there with big ware-
houses and they didn't have a damn thing to sell.) So, I

could have sold direct retail myself, but what I did, I
picked out the best wholesalers I could find and I gave

93

them their material -- gave them something to sell --
and they were happyj as hell to do this, and when things
got a little rougher later on, they were grateful and gave
me preference.

In considering a potential market the O-E does not depend
solely on personal contacts and reciprocity as does the C-E. Cer-
tainly the O-E utilizes personal contacts but he does not feel limited
to this method Of approaching the market. He evaluates the market
and aims his marketing effort at the segment he considers to be
most fruitful. He has no fear of moving to an area where he has no
previous contacts. For example, one O-E moved down from Canada
and started a company in the Tool Town area. This move occurred
as a result Of his contacts with members of an international as socia-
tion and resulted in a group of executives in Tool Town forming a
syndicate to back him. He stated that he did not know any customers
in the Tool Town area so he had to make cold calls on potential
customers. He felt it would not do him any harm to have contacts
through his partners, but he did not rely exclusively on this. In
relating his story, he says:

Well, I thought that there was a limited market in

Brandon. I did get some business in the West and I came
a couple of times and got some business in the East.

However, the distance limited the profit I could make
on it.

Well, anyway I made a point of meeting people. I
exchanged visits with people in Minnesota. There were
men in the transit advertising business--a fellow by

94

the name of O'Rourke. He knew a lot of people in Tool Town.
Anyway one time they came to visit my plant in Brandon.
Before they came I didn't give them any clues what type of
plant I had but it was very advanced. I had a lot of my equip-
ment from Scotland and it was much advanced to anything in
this country at that time. Well they got there and they were
just absolutely amazed. This O'Rourke during the same day he
was here he phoned a fellow in Tool Town and he told him, I
think you should get this man to go to Tool Town. However the
man said (this is in June of that year) they already had three
local boys and were going to go ahead on that. Anyway I talked
to him that day and he invited me to drop in (down in Tool Town)
anytime. I Said that I was going to a convention in the East
and on my way back I'd drop in and see them. When I did I
was absolutely shocked at their Operation. It was very poor.
They just didn't know how to do it; they didn't know how to
go about Operating this business. I met this Sobrrm and his
partner and I told them what was wrong. They made me an
Offer but I said well I wouldn't just take a job. I'd always been
self-employed; I'd always been my own boss and I had a nice
Operation in Brandon and I just wasn't going to give it up that
easily. I said,well,I would make a deal. I'll take a month off
and I'll come down here and I'll spend the whole month and
I'll help you men. Also I will go out and exploit the market
here. I'll spend eight hours a day for one month. I don't know
if I can sell Americans but I'll try. I'll hit the biggest accounts
there are. -

Anyway I guess I was pretty lucky because I went out and
hit the biggest accounts in the Toll Town area and I got more
work than they could handle. At any rate I got quite enthusi-
astic myself. SO I suppose you could say that this is when I
had to take my big gamble. I had to sell my business in Brandon;
I had to sell my home. My wife was very gracious about it and
she helped a lot; she didn't Object at all. At any rate, it turned
out that I couldn't sell my business. People would say it is just
too personalized without you, there is no business. So I got my
partner and this friend Of mine to carry on the business. I talked
another friend who is a sales manager of a large advertising
company to come with my partner and work with him. Unfortu-
nately this fellow was hit by a freight train just shortly after this.
After this, he just wasn't any good. He was just so unnerved by
the experience. SO the business folded up in about 60 days. I
got nothing out of it after putting 9 years into it.

95

Anyway, I started out down here with very little cash. I
bought an older home in Manchester and I fixed it up. We
have a new home now and we're quite happy but when we came
in we didn't know one soul in Tool Town and I guess---I know
the first couple of years were tough for my wife.

Interviewer: How were you able to break into the auto market?

Respondent: Well, I know What I was selling and we were selling
creatively. We presented the methods, our method of producing---
the way we did it. And the versatility Of the way we die the pro-
cess helped us an awful lot.

Interviewer: How did you make your first sales?

Respondent: Well, I just approached the purchasing agent. I
didn't try to go to the top or go around it. I suppose the con-
nections I had Opened certain doors for me but then it was up
to me. I'd say the majority Of it was just trial and error.

Another example of what could be termed the direct-action
approach is the case of the ex-lawyer who went into the toy business.
He says:

I decided my model cars should have nation-wide distribution
and proceded to contact the toy buyers of the four largest depart-
ment stores in the country. Contacting the toy buyers was a
very interesting experience. I travelled to all four and I got the
same story from all of them. They were very conservative.

One placed an order for only five dozen of these cars. I flew
down to see the buyers at the next two and got the same story

and figured that the whole thing was a fizzle. I was talking to

the toy buyer at Picks. I was attempting to sell him on this car
and explained to him that I could ship him the new model car on
the day of introduction of the new models. He left me in the office
for a few moments and came back with a little wooden automobile.
He said, Now what do you think of this? I told him that I wouldn't
give a dime for the piece of junk. He said that he thought the
same thing all along; that it was a cruddy looking thing but that

it was one of the largest selling items Picks had. He told me
that he had been stung so many times from these wrong decisions

96

that he couldn't possibly give me a bigger order until he
could see what was really taking place.

I came back home very dejected. I felt that I could deliver
on the auto account but it wasn't enough to make a real going
business. I was ready to sell the whole thing out to somebody
who could do something with it and complete the auto account.

I didn't want to go back into law; I didn't have much interest

in it because Of the picayunish things that go on in law which

I can't stand. I moped about for a couple Of days and finally I
made up my mind to call Bart Pick on the phone direct. I told
Bart Pick my problem and described the car to him and men-
tioned the story 1 had gotten from his buyer. Mr. Pick told
me to come to see him in a couple Of weeks. It turned out that
all the presidents Of all the Picks Operations in the four major
cities and the other stores Of Picks were at the meeting plus all
their chief buyers. I was told that this was the first time in
the history Of the company that all the presidents were brought
together on a toy buying meeting. They looked at the models
that I had brought with me and immediately placed an order for
some 5, 000 of these cars. I came home with a purchase order
and started production. On introduction day we were really in
business.

There is a buying service for most Of the commodities in
New York City that keeps track of sales of certain items, spot
checkers and so on. This buying service reported that on Open-
ing day the sales Of these car items were really a hot thing. LO
and behold, within weeks I had orders for millions Of these cars.
I couldn't deliver them, but we worked day and night and finally
got them out. From that point on I was really in business.

The O-E is very much market-oriented. He actively seeks
and searches for new products and for new markets. He usually
will have what he terms an "ideal file" where he jots down thoughts
which may possibly come to fruition at some future date. He is
continually seeking new possibilities and new Opportunities. In doing
this he uses his wide background and large number Of contacts
throughout the country. Also, his breadth in education and job ex-
perience (in contrast to the C-E) make him attuned to and receptive

to Opportunities in many areas of the total culture.

97

3) Communication Ability

We noted that the C-E has little communication ability. This
is not sofor the O-E. He is highly verbal and quite skillful in his use
Of the English language. He is very effective as a story teller and
also extremely effective in social interaction situations. It was noted
by the interviewers that once the initial interview began, there was
very little need to prod the O-E to further discussion. He would tell
a very coherent, well-reasoned, logical and interesting story. This
is in contrast to the C-E where the interviewer had to continually
probe for additional information. Even when the O-E comes from a
working-class background he is able to learn the middle-class skills
of communication.

The O-E is very effective in non-verbal communication.

 

For a discussion Of various aspects of non-verbal communi-
cations see Edward T. Hall, The Silent Language. Do‘ubleday 8:
. Company Inc. , Garden City, New York, 1959. Hall is concerned
with differences between various cultures, and he uses as examples
non-verbal communication through the treatment of time and Space.
Goffman in his Presentation of Self in Everyday Life also borders on
discussion Of non-'verbal communication in a social interaction situa-
tion when he distinguishes between the "feeling" and "the feeling
given off. " Many writers in social stratification have discussed
methods of communication class positionthrough non-verbal symbols.
Obvious items such as dress, etc. , have been popularized by novelists
like Vancjs Packard. However, Bergel feels that "manners" are
perhaps the most characteristic blass traits. E.. E. Bergel, .
Social Stratification, McGraw Hill, 1962, p. 403.

 

 

 

98

He communicates that he is a successful, effective executive through
his use of material symbols such as his Office decor, furniture, and
personal dress.

We saw that the C-E does little travelling and prefers to stay
close tO home. In contrast, the O-E enjoys travel and is very widely
travelled. Furthermore, the 0-53 utilizes this exposure to gather
information on new products and market Opportunities. The O-E has
the "spirit of Hermes" as discussed by McClelland. 4 As one in-
dividual said:

Oh, I've travelled to Europe quite frequently. I've been over '
there a couple of times in the last couple of years. I know the
people; I know the economic climate; I know the places to go.

If I wanted to go into business there and made a decision to do
it, I could be set up and running within two months.

d) Competitive 'Strateg_i_e_s

The O-E shows greater diversity in his approach to competition
than does the C-E. He is effective in the use of different strategies
apprOpriate to different market situations. The C-E competes pri-
marily on price, quality and personal reputation. The C-E can com-

pete on these bases.

In addition the O-E is able to utilize product development as a

 

4David C. McClelland, The Achieving Society, see esP. Ch. 8,
pp. 301-355. "The Spirit of Hermes." D. Van Nostrand Co. M61.

 

99

competitive strategy and effectively apply the "marketing concept. "5
That is, starting with the perceived consumer preferences, the O-E
designs a product which he believes will appeal to the ultimate con-
sumer. For example, one manufacturer of steel doors started his
market analysis at the ultimate-consumer level in the following way:
Well, I decided that what we needed to produce was an
electronic door which would sell at about $40---this in com-
parison to the other electric door selling for $120. SO starting
with this price I attempted to design a product which would be
retailed at that specific price and I was successful in doing this.
This will not only put us in a better competitive position but
additionally it will give us some glamour on the stock market,
and I want this because I want to get some more capital to grow.
My stock brokers have advised me that we need more glamour to
be able to appeal to a wider market.
Here he is utilizing a strategy which will fulfill at least two functions
for him. His new product will improve his competitive position and
make it easier for him to attract investment capital which will enable
him to finance further growth.
I A Japanese manufacturer gained sales at one O-E's expense by

turning out a similar product at a lower price. The O-E reacted by

developing a new product line. Rather than trying to compete on price

 

5For an interesting discusSion Of the historical develOpment
of the term "Marketing Concept" see "Evolution of the Marketing
Concept, " Bernard J. LaLonde in A. M.A. Proceedings, Dec. ,
1963;1Toward Scientific Marketing. Ed. , Stephen A. Greyser.

 

100

alone he adjusted in another dimension and brought out a new product.

He showed flexibility in analyzing different possible readtions that he

could make to this competition.

Another example of diversity in strategy is shown by one O-E

who manufactures consumer products and also produces tool and dies

for the auto industry. He uses a different? competitive strategy in

each of these areas.

Well, actually, I have taken the companies through three
phases. The first phase was stamping, the second is the tool
and die phase, and the third is the consumer products phase.

Now, I got out Of the stamping business when the demand began

to decline. Then I went into the tool-and-die business which I'm
presently in and I also diversified into the consumer products field.
I have felt throughout my career in the history Of our corporation
that timing is very important---that is, the timing of these moves.
We have gone through a process Of planned diversification.

Now in the tool-and-die business we don't compete with the
"alley-shops. " We take the big jobs. Also, we build prototypes
and we make molds. Because of this we are in much better shape
to estimate the costs of dies. Actually most of our business is
with the auto industry.

Now in regards to our consumer products being manufactured
in another state about 65 to 70% of the production is sold to private
companies who put their own brands on it. Actually, I wish our
ratio was even more. I feel that this is the perfect marriage
because I am able to supply the goods cheaper than the buying
organizations could make them, but also they are able to supply
the advertising and the sales organization which I can't afford.

I make products for such companies as Collosal, and so on. You
see, the thing is, they won't go to the smaller companies who can
competezon price. They won't go to these other small outfits just
to beat my prices because of the quality factor. They know that

I am going to supply quality goods and that they can be assured Of
this. They wouldn't be too sure what they would get if they went
to another company who would produce the same products but

at a cheaper price.

101

Now as far as the future is concerned [ at this point the re-
spondent get two large pictures of a golf cart and showed them to
the interviewers. ], this is what we are thinking. In the golf-cart
field there are really only twp competitors. Now, one Of these,
Shooking, can sell these golf carts but they can't afford to build
them, while we have excess capacity here. The machinery is
in the plant and all that I have to do is use it. Also, I have the
know-how. What we are going to do is this: This golf cart will
be constructed of two stampings which are welded at the seams.
There will be a rubber bumper completely around the body. Of
course there will be a number Of variations as far as the top of
the golf cart is concerned. One will be a post-Office delivery
cart, the other a golf cart, and maybe a sports cart and a shopping
cart. TO the best of our knowledge we will probably have a four .
horsepower engine in the cart. Now we can manufacture these
and sell them for about $750. 00. At this price no one can compete.
The comparable golf cart now being sold costs about $1, 200. 00
Now this golf cart idea is the ideal solution since I won't be com-
peting with the big names. The advertising for this type of pro-
duct are just small blurbs in Sports Illustrated and other such
magazines. We won't be bothering the large corporations with
their great resources fOr advertising. SO, again we will be in
an ideal spot.

 

In summary, the O-E uses a variety of strategies to meet
competition.

e) Plans for future Growth

In contrast to the C-E the O-E sees industry and the business
world as Open-ended. That is, he does not feel that the only way his
company can grow is to take sales away from a competitor within his
industry. The O-E feels that there are many directions that can be
taken in the pursuit of company growth.

His plans for the future are concrete, well laid out, detailed
and well-researched. For example, one fabricator of aluminum had

done considerable research into integrating backwards. He says:

102

Well, you see that picture on the wall---that's a picture
of our new plant addition. That will be added on to the rear
of the present plant' and will add 18, 000 square feet. We are
going to go into the casting of aluminum. In other words, we
are going to buy the pig aluminum and then make our own aluminum.
We will produce the finished aluminum from the pig. Now this is
a fairly new process, and we are doing this on a licensed basis
and it is going to cost us quite a bit of money to buy the necessary
equipment. I've had some problem doing the necessary financing.
Actually one financial deal is confidential and on the other One
I have had to use Some inventory loans. In the one case I've had
to‘pay about 13% for the money and for the other about 4%.
Actually, I am up to my ears in debt. However, this will put me
in a much.-. stronger position. I will be able to buy the pig
aluminum at a much better price. Then, too, this will also allow
me to use all of my old scrap aluminum. That is, for every one
pound Of pig aluminum I use I have: to add two-thirds of a pound of
scrap. Actually, I will have to end up going out and buying scrap
aluminum in addition to the scrap I get from my own Operation
here.

Here we see that he has gone through- considerable investment and

risk to integrate (backwards. He has been willing to do this as one
way of improving his position in the highly competitive market for
fabricated aluminum. However, he has not stopped here in his
thinking. When questioned further about the future he says:

Well I have a dream. It is probably just a dream. You
see at the present time it costs a great amount of money to go
into the manufacturing of aluminum from bauxite---something
like fifteen to forty million dollars. This is probably a pipe
dream but I have noticed a couple of articles lately on a new
process. [At this point he proceded to go into his desk and pull
out a couple of notes he had from his idea file. He pointed to
an article from Business Week and one that came from the Detroit
News.] You see this is a new process for the manufacture of
aluminum from bauxite. They have already built one pilot plant
in Montreal, Quebec, and another One . in France. Now if this
new process is successful it will enable a manufacturer to do a

103

one-stepimanufacturing process from bauxite rather than having
to go through the traditional two steps. This will probably mean
that it will cut the investment necessary from fifteen million to,
oh, about. four or five million. Now I am watching this; I found
out where I can go when I get over to France. I am going to go
over there and talk to these people and find out what I can. It
would probably have to be some type of license arrangement

but this would be all right. [At this point he pointed to his files
and to some other notes in the file.] You see, what I have here
is my idea file. When I talk to somebody and I get some ideas

I immediately go and write them down and I make a note of them.
At any rate this is my long-run idea. If I could get into manu-
facturing at the base then I would be really set. I don't know
whether this will ever come about.

Another example of planning is shown by the following con-
versation with an extremely successfulO-E.

After I sold my business in 1950 I looked around for some-
thing to manufacture. I wanted something which I could mass
produce from a sizeable tooling cost. It had to be a manufacturing
item. I surveyed the data and the information that were available
and I felt that the population in general would have a lot more
leisure time to spend as well as the fact there was pent-up
income---money to spend on these interests. This led me to
get involved in the manufacturing Of consumer products. I got
into the plastics industry and established a plastics manufacturing
company. Actually, I started manufacturing items that were used
in bowling games. I specialized in certain items which had a
lot of volume. I wasn't interested in manufacturing the sporting
goods across the board. For example, I investigated the golf-
ball business but that didn't look too good. Actually, many of
the items in the golf business are used in loss-leaders to attract
people into buying other sporting goods. My reason for thinking
about golf and bowling was that I felt that it had a long carry-
over. That is, it was not a fad in any'particular age bracket but
people could play these sports for many years. I thought that
there would be a long range business opportunity in Sports that
had a popular appeal and also could be played even into the
retirement years. I bought a golf club and then sold off part of
it and a housing development out of it. It;payed for my initial
.inve stment.

104

I got into real estate and building a fair bit. I got some
wood-working shops and machine shops too.

About 1953 I recognized that diversification and geographic
dispersement Of industry were going to be the thing. I felt that
a number Of plants would be moving South and this would be the
character of the transportation system and that railrods would
not be able to provide all the services whereas the trucks would.
So, when I investigated the truck industry I found that the truck
and trailer manufacturers were primarily sheet-metal workers
who just slapped up two-by-fours and sheet metal and made trailers
out Of them.

Then they would mount this on an axle and set it on the back of
a tractor and that would be it. The truck manufacturers, because
Of the character of the industry and the interests of the people in
it, particularly the large ones controlling it, were not in the
‘ business of making the machine-tool parts required for the
running-gear. The running-gear includes all of the metal pre-
cision rolling equipment between the wheel and the trailer-bed
itself, including the springs, the jacket and the axle mountings.
So, I proceeded to set up a machine shop which would machine
all Of these parts and would be sold as a complete component unit
to the trailer manufacturers. This has really boomed into a big
business especially since I have gotten some contracts from the
bigger firms.

Also I felt that, when the highway building programs hit, that
we should be ready to mOve into this kind of area. SO I got into
the hydraulic business especially as it related to the earth moving
equipment. Also, in looking around in this area, I came across
the diesel engine. I found that the problem with the diesel engine
is feeding the gas into the unit in which the variables change
when the engine is heated up. SO we developed a thermal unit
which regulates the flow of the fuel into the diesel engine and
this is based on the temperature of that engine in its various
Operating conditions. This has been very profitable. The unit
is mounted on a great number of diesel engines made in this
country.

Also ‘we have an export division which manufactures and sells
items for foreign consumption, particularly in the plastics line.
I've spent a great deal Of time in Russia, Europe and Central and
Southern America. I feel that these areas have a great potential
because the population is there and there is going to be a large
market to be satisfied. It is just a matter of time.

105

The point of course is that the O-E consciously and actively
wants to grow. He wants to expand and diversify. He is not satisfied
to continue with the status quO. He feels when his organization gets
large enough, then he will let someone else take over the Operational
day-tO-day administrative duties and he can get into long-range
planning and research.

This aggressiveness again shows one of the essential differences
between the O-E and the C-E. The O-E wants to build an organization,
and he feels he can do this because he can evaluate the individuals
working for him and that they will be able to do an adequate job.

His organization will free him for more long-range planning, since
he will not have to use his time on day-tO-day details. If the job his
administrative executives do is not perfect or not as good a job as
he would do this does not seem to him to be a sin, as it would to the
C-E. Rather he justifies it on the basis that he can better utilize
his talents in looking to the future and taking a broader perspective.
This attitude is related to the fact that his pride is in the total com-
pany growth and he does not limit his thinking to the quality of his
particular product or process. He is concerned with the quality of
his products but assumes that this will be attained and sets his Sights
on still higher goals.

This idea Of utilizing his organization as a vehicle is shown

in the statements made by one O-E:

106

I lay my success primarily to the idea that I am able to make
immediate and quick decisions. Now, I used to have some prob-
lems along this line before I had a staff of people that I can rely
on to feed me the facts and figures that I need. However, back
in those days I felt that by working seventeen or eighteen hours
a day I was able to achieve the same results. Since then, Of
course, I have my own organization to give me these facts.

3. Relationship to External Social Environment

 

The life-style Of the O-E can be characterized as being upper-
middle or lower-upper social class. The O-E, in contrast to the
C-E, is highly invOlved in the social life of his community. He, his
wife, - and family all belong to many community organizationsincluding
a number of the appropriate social clubs and businessmen's organi-
zations. He will usually be active in the Chamber Of Commerce
and other service clubs. He and his family are widely travelled,
usually taking vacations abroad. They have a summer home at the
beach Or in the mountains and participate in swimming, water-Skiing,
snow-skiing, tennis, golf, or other activities appropriate to an upper-
middle or lower-upper family life style.

An example of high involvement in professional associations,
travel, etc. , is Shown in the following quote:

Well, I'm a member of the Manufacturers Association;

I was a director of this at one time. I'm on the Chamber of
Commerce; actually, I'm the head of the Congressional Action
Committee of the Chamber of Commerce. I'm a Mason. I'm

in the Businessman' 8 Century Club. I belong to the Country Club,

the Kiwanis. Play golf, fish, go hunting. . We have a cottage at
the lake and we go out there now and again. Actually about

107

1956-57 I started easing Off a little bit on the work and taking

it easier. It seems to be that the biggest function Of a top man

is to build an organization. You still have to know all the details,
but once you get it built you can slack Off a little bit. I've

noticed this, that even though I don't have to work as hard any more,
I can't be away from the business for too long Of a time or things
start going downhill.

Similar diversity Of interest and activities is shown in the fol-

lowing conversation:

I Spend a lot Of time away from the plant. I enjoy being On my
own. I feel that the plant for a long time now has been set up to
Operate without me. Last year I spent four months in Europe
touring around---some business, but mostly for pleasure. Then
I just came back from a two month skiing trip in the West. There
I keep a boys camp where every summer I take boys out. It is
sort Of a ranch set-up, not really a camp. This is something that
I thoroughly enjoy and I am going to spend more time on. Also,

I am an amateur astronomer and I hope to have more time to spend
on this hobby. I don't see any sense in having wealth if you can't
get out and enjoy it. Actually, during the time I was in Europe

for four months, the plant seemed to run better than if]? had been
here.

The O-E is quite active in church and church affairs. He will
often be on ruling committees and be quite active in raising money.
AS noted above, he may have his own personal charities to which he
donates considerable time and effort.

My conscience sometimes bothers me with all my wealth.
You see of course I never had much food in the early days; I
still don't eat much---practically nothing at all during the day.
When I go home at night my wife has usually prepared an immense
meal and it bothers me to pour half of it down the garbage disposal.
I've gotten into philanthropic work and I take a great deal of pride
in this. My biggest philanthropy is to assist children in getting
operations which they need. For example, one of the corrective
Operations which I handle is the Operation which corrects hairlip.

108

If. this is left alone too long it never can be repaired. I assist
the parents Of the children and take care of the entire thing
through my philanthropic association.

The children in the family will go to the best schools. In some
cases they will go to a private school at the elementary and high
school levels. It is the normal and expected pattern that they go to
college, in many cases an ivy-league college and in some cases may-
be even a European college. The following account demonstrates this
pattern:

We only have the one girl and she is going to the Sorbonne
this spring. As a matter Of fact, next week we will be going
over to France---my wife and myself---and then we will take
her down to Spain and Portugal for a few weeks for a vacation
and then take her back to School. AS far as her education is
concerned we lived in Middlebrow Park prior to 1950 and then
when we moved to Highbrow she went to a Highbrow high school
for one year and then after that went to high school. [ This is a u
very exclusive and expensive high school in a nearby district.]
After graduation she went to Hollins College at Roanoke, Va. ,
which is a private college. [Again, this is a very expensive,
exclusive private college.] Then after She graduated from
college she entered the Sorbonne where she isnow going. She
is taking courses mainly in the area of French literature and
history and so on.

In summary we can say that, in contrast to the C-E, the O-E
and his family are highly involved in their social environment. The
home of the O-E will be located in one of the "better" districts of
town, even if he began with fairly humble roots. He is highly involved
and active in professional associations and also in community organi-

zations. The types and number of’associations he is involved in are

109

much greater than for the C-E. The family is also involved in many
of the activities with the O-E, including church, entertaining, com-
munity organizations, travel, and vacations. The educational pat-
tern for the children follows that Of the upper-middle or lower-upper
social classes.

As with other areas considered in this study, it can be noted
that the O-E Shows a much greater and more,diverse involvement

in his social environment than does the C-E.

C. Summary and Extraction of the O-E Characteristic Orientations
In this chapter the orientations and behavior patterns of the
O-E that are held to be most useful analytically in constructing the
ideal typology of the O-E have been presented. In moving to a higher
level of abstraction we can consider the central theme of the O-E's
orientations and behavior patterns. The hypothesis evoked from this
analysis (which is in contrast to the hypothesis evoked from the

analysis of the C-E) is: The O-Eperceives and reacts to a broad

 

range of his culture. On the basis of the analysis done in this

 

chapter some sub-hypotheses can be derived from the major
hypothesis. These are held to be:
1. The O-E exhibits breadth in education and training.

2. The O-E exhibits high social awareness and high social
. involvement.‘ ‘

110

3. The O-E has high confidence in his ability to deal with his
social environment.
4. The O-E exhibits an awareness and orientation to the future.

CHAPTER V

EMPIRICAL DEVIATIONS FROM THE

CONSTRUCTED IDEAL TYPES

Substruction of the Type to the Attribute

Sphere from Which it is Drawn

 

The analysis in this chapter will follow the outline as presented
by McKinney. The hypotheses evoked from constructing the ideal
types of entrepreneurs were: The O-E perceives and reacts to a
broad range of his culture. In contrast: The C-E perceives and
reacts to a limited range of his culture. There will be less than
complete correSpondence between the constructed types and the
empirical classes to which they refer since, by definition, "the
type is a hypothesized compound of empirically Observed, but

3112523 and purified attributes of the class being studied. "1

Working Definitions

 

We will use the following working definitions. 2 A case ex-

hibiting the characteristic delineated under number one will be

 

lMcKinney and Kerckhoff, p. 130.

2 . . . . . .
"Working definitions are adequate if the instruments or pro-
cedures based on them gather data that constitute satisfactory indicators

112

assumed to be representative Of the C-E and the characteristic
delineated under number two will be assumed to be representative
of the O-E.

l. Breadth in Education and Training

a) Formal Education

 

(1) Technical Only
(2) TechnicalPlus -- The entrepreneur has a mechanical
or technical education from some formal institution and, in addition,
training or education in some non-technical or non-mechanical areas
such as law, English, economics, or other areas which are usually
considered a part Of the social sciences.
b) Types Of Jobs Held

(1) Technical Only

 

of the concepts they are intended to represent. Whether this result
has been achieved is Often a matter of judgment. An investigator
may feel that his data provide reasonably good indicators of his
concepts; a critic of the study may feel that they do not. It frequently
happens that the investigator himself is aware that his data constitute
only a very limited reflection of the concept he has in mind, but,
eSpecially in the early stages Of research on a problem, he may not
be able to devise a more satisfactory one. In any case, although
the investigator will usually report his findings in terms of his
abstract concepts in order to relate them more readily to other
research and to theory, he and his readers must keep in mind that
what he has actually found is a relationship between two sets of data
that are intended to represent his concepts. "

Selltiz, Johoda, Deutsch, Cook, Research in Methods in Social
Relations (New York: Henry Holt and CO. , l960),pp. 43, 44.

113

(2) Technical Plus -- The entrepreneur has held
jobs that are different from the purely technical, practical or mechan-
ical. For example, he may have been a manager Of or a clerk in a
retail store; he may have worked as a salesman as well as having
worked in a tool and die plant; he may have held the position Of
foreman in a plant or as an engineer in charge Of a project.

c) Reference Group

 

(1) Not Management

(2) Management -- The category "work-force" as a
reference group is not used here because, as we noted in the previous
chapter, the individual entrepreneur does not necessarily identify
with either management or the work-force as a reference group.

d) Management Sponsor or More Than One Role-Model

(1) NO

(2) Yes -- Case is included here if the entrepreneur
indicates that he worked closely with, or as an assistant to, a top
executive in a company. Also, the entrepreneur's statement that
various individuals influenced him at different stages of his life
is assumed to indicate flexibility and receptivity to a changing
environment.

2. Social Awareness and Involvement

 

a) Social Involvement

 

114

(l) Belongs to Professional Associations Only

(2) High Community Involvement -- active in community
associations not directly related to his profession, trade or business.

b) Communication Ability

(1) Very Limited

(2) Effective with Many Forms of Communications --
our concern is with verbal and written communication. Evidence Of
verbal ability is gained through the interviewer's Observation and also
by the content Of the interview itself. Written communication ability
is assumed when the reSpondent relates information on reports or
articles he has written.
3. Ability to Deal with the Economic and Social Environment

/ a) Delegates Authority and ReSponsibility to Build an

Organization
(1) NO

(2) Yes -- The entrepreneur is placed in this category
when he indicates he thinks the organization can now run itself or

says he tries to hire responsible peOple to lessen time he spends

on routine matters.
b) Criteria for Selection Of Employees
(1) Particularistic -- Some employers are concerned

about whether or not they have a rebel (someone who does not really

115

identify with the union) and someone who will turn out a good day's
work for a good day's pay and thereby be a full member Of the family.

(2) Universalistic -- It might be noted here that when an
entrepreneur hires in a "universalistic"manner, he does not expect
tO get the "ideal" employee but, rather, he feels that he can deal
with those employees who meet his standards which are similar to
those Of most other organizations.

He can take this type Of person and still build an organization
that is able to compete effectively with others.
c) Sources of Capital Utilized for the Initiation Of the Company

(1) Maximum Of Two Sources Utilized

(2) Over Two Sources of Capital Utilized -- In this area,
it has been noted that the O-E is much more flexible in seeking out
capital and feels that he can utilize many sources. As an Operational
definition the cut-Off point has been set at two sources of capital
utilized. In many cases the C-E utilized two sources, his savings J
and/or money borrowed from a close friend or relative. When more
than two sources are utilized it would indicate a movement towards
the O-E end Of the continuum.
J, d) Methods of Establishing Relationships with Potential Customers

(1) By Personal Contact Only -- The C-E builds his organi-

zation on the basis Of his reputation in a particular industry. Never,

116

in the cases analyzed, does the C-E go into an industry where he
has had no previous experience. When he does start his business he
gains customers (because he has known them for many years and, more
importantly, they have known him. This is in contrast to the situation
where a variety Of methods are used to contact customers - personal
selling, advertising, direct mail, etc.

(2) A Variety of the Usual Marketing Methods

e) Competitive Strategies Utilized by the Entrepreneur

(1) Limited -- TO price, quality and reputation of the
company. The entrepreneur feels that he can compete only on these
bases.

(2) Various Strategies Utilized -- In addition to price
and quality, the O-E sees many methods that can be utilized such as
new products, new marketing methods, different channels of distri-
bution.

4. v” Time Orientation

 

In this area it is held that the C-E end of the continuum is
indicated by an orientation which is limited to perceiving and reacting

effectively to the present and to the near past. 3 An orientation to the

 

3That there are vast differences between cultures in the concepts

and perSpectives of time and that the concept is something that is
learned and is not an innate part of ”human nature" is well documented
by Edward T. Hall in The Silent Language (Doubleday 8: CO. , 1959).

 

future, indicated by statements regarding concrete plans for the
company in the future or statements indicating the entrepreneur
had made plans long before he actually initiated the company, is
taken to be indicative of the characteristic of the O-E.

a) Amount Of Previous Planninp Prior to Initiation Of the

 

Company

(1) NO evidence Of plans established more than one year
prior to initiation phase.

(2) The entrepreneur's statements indicate that he had
planned initiation over one year prior to actual start Of company.

b) Future Plans for the Company

 

(1) NO plans for growth or change.
(2) Wants to grow and discusses concrete plan on how
to accomplish this growth.

c) EmplOLee Relations

 

(1) Paternalistic -- The entrepreneur is placed in this

category if he indicates that he perceives of his workers as children

 

In addition, the fact that there are differences between different
segments Of the social structure is posited by Martineau. He con-
cludes that time orientation varies between segments Of social classes.
The middle-class is "pointed to the future" and the "lower-status is
pointed to the present and the past. "

Pierre Martineau. "Social Class 8: Spending Behavior, " in
Journal Of Marketing, Oct. , 1958, pp. 121-130.

 

118

who need to be protected, or uses the analogy that his company is

his family, or indicates in his statements a strong emotional involve-

ment with his employees.

(2) Not Paternalistic

Analyzing the Cases

 

In analyzing the cases by using the preceding criteria a very
simple scoring system was used. On the basis Of the writer's judg-
ment the entrepreneur was given a -1 if he exhibited the character-
istic defined as being typical Of the C-E and a +1 if he exhibited the
characteristic defined as typical Of the O-E for each Of the categories
above. When there was not sufficient evidence in the interview on
which to base a decision, a blank was left and assigned a score of 0.
For example, under formal education there are two categories, -
technical only and technical plus. If the individual placed in the
"technical-only" category, he is given a -l and if he placed in the
"technical-plus" category, he is given a +1. Since there are a total
of fourteen items under the four main categories, the maximum
score that an individual could attain on the C-E end of the continuum
would be -14 and the maximum score on the O-E end would be +14.

McKinney makes the point at this stage of the an aly s is

that if ”it appears that two or more of the attributes are very highly

119

correlated, some may be dropped. "4 In our cases there are some
categories that are very highly correlated, as for example, employee

relations and reference rou orientation. However, neither of these
M :LJ

 

were drOpped since it was noted that in some interviews information
was available On one Of these categories and was not available on the
other category. That is, there might be direct evidence that the
entrepreneur is definitely oriented to management rather than to
the work-force but there may not have been evidence that he treats
his work-force in a non-paternalistic way.

Table 1 presents in tabular form the scores Of the various
entrepreneurs based on the Operational definitions discussed. In

Table 2 these entrepreneurs are then plotted, by means of the numerical

 

4"Thus, before going to the empirical data for a rigorous exami-
nation Of the correSpondence between the type and the actual intellectuals,
it is well to decide on the basis of a general knowledge of all the rele-
vant data and a limited number of complete cases whether all of the
attributes included in the type are needed. (Of course, it is also poss-
ible at this stage to locate additional crucial definitive attributes not
originally included in the type. ) If it appears that two or more of the
attributes are very highly correlated, some may be drOpped. For
instance, if all those who exhibit pride in intellectuality as an end in
itself also exhibit self-pity, there is no need to carry both attributes
in the type definition. Also, if it is found that some attribute included
in the type on rational rather than empirical grounds is not found in
the empirical cases, it can be drOpped. Of course, this type of simpli-
fication of the type definition can also take place after the empirical
data have been more rigorously examined, but much effort will be
saved if simplification can take place at this time. "

McKinney and Kerckhoff, pp. 131-132.

ouaomeuseee

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“38583515351355

SSSSSSRKSR}

32

3381333

120

Table 1. «Analysis Of the Entrepreneur

 

 

1
Breadth in Education 8 Training
ormal Work Re erence
ucstlon Experience roup
Score Tech.Tech.+Tech.Tech+ ugtmt.Mgint.

12 + + +
+

10
.9
-8 + + -
13
45

-10 - -
-8 -
11
12
14
12
11
8
6 +
1
-3 -
-14 - - - -
-11 - - -

+++++
+++++++
+++++++++

10
-1 + + -

'10 - -
-1 + + +
-3 .. .. -

-1 + + -

-12 - -
.9 - - +

-11 - - -

-1l - - -

11 + +
12
13 +

++++

gagged-power

NO

+++++

 

II
Highs School Awareness

Glnvolvement

Social Ceixgnpnication

Wigs.

mph/smart
Gfiup’ 188.13% Ltd.

4.

++++

+
+ .

++++++++

39
4O
41
42
43

46
47
48
49
50
51
52

1 1

121

Table 1. --(Continued)

1
Breadth in Education 8 Training

1
High gclhook Awareness
lnvo vement

 

F 1 Work R f
Educa On Experience Egg“

0.38.15. 5”“

 

cial C013? bufllCEthn

15"???“ ement

 

Effecfy

Score Tech. Tech. +Tech. Tech+ fiatmt.Mgmt. NO lees rups Hggigilipgwt. Ltd 0:23;
-11 - - - +
-10 - - - -

-4 - + -

-6 - - +
-13 - - - .. - -

2 - -

.4 + + - -

-2 + - - .- +
.5, 4, 4. + - "

12 + + .. + +
.9 - v ' - .. + -

-3 - - +,
12 . + + + - + +

 

'OWVOIUIJiWND-e

HHHHr-fis-‘s-OH
\IGUIJSUDNHO

122

 

Exhib 6J1” exiibi tyG COI

 

cranes in A ili

Midi: ange Of anemic 8 ocil vironment

Deal

 

1V
Time Orientation

 

331383? farticu%ni- c.1153 rosrgilgfion Suggestive O:1a:i:?§e Wemflaaj
NO Yes ristic vsrsal 1.31 9:33: on" Vsrie Limited Variaui Mafia; at
our}? ty .
+ + + + + + +
+ + + + - + + +
+ + + + + + + +
_ - + - + -
+ - -' -' - , - I.
+ + - + + +
+ + + + - +
+ + + + + + +
+ + + + + - + +
+ + + + + +
+ + + + + -
+
+ + - -
+ + - + - - +
- - - - - - 4-
- e. u .- — + -
+ + + + + - - +
e. + .- - - -
.- - - + .. -
- - + .. - -
+ + - - - +
.. .. - + - -
e. + .- .- .-
.. .- - - - +
.- - + - .- - .-
+ a. + - - .-
- + - - - +
+ +5 - + +
+ + +
+ + +

123

._—_.

 

 

 

 

 

IV
Exhibvifl Fle Ins Co erence in Abili Deal Time Orientation
th Huge O conomic 8 Soc 81 vironment
1 ate: lilting 11:31 S 193 o e tive 31:10th
33‘5“” 5:“ 251:: 2 :1 :5: P555651“ S412; 5' 133°“: 1 1311} as ‘55: W“ Mazgffi
er
NO You lue two Cont; onlx Varieg Limited various PfL 8 c8“
- - u c +
C c + u I n n
+ + + +
- - + - _, .. _ +
- + - - +
+ + + + + + + +
- + - -

 

124

Zég

 

\
:Hlnvz/ V :Nl U:

 

.3 a :5... ,, 3. f

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8&9 iguaaaoham «a 833339. .N «Ba...

125

score assigned them (the total of the fourteen +1, -1 and 0 scores).
To simplify the subsequent analysis the entrepreneurs are arbitrarily
grouped into what is considered to be appropriate clusters. This can
be seen in Table 3.

At this point the analysis could be carried further. McKinney
says that one could ”indicate not only how many cases do not fit the
type precisely but also the degree to which they deviate from it (how
many attributes that they do not exhibit) and the pattern of these devia-
tions (which attributes they do not exhibit). "5 He suggests that one
could use a scaling technique to accomplish this, a Likert or a Guttman
technique. To pursue this analysis further is beyond the scope of
this study. It is an approach that could be considered later.

McKinney holds that a manifest function of types is to

Identify, simplify and 'order' the concrete data so that

they may be described in terms that make them comparable. . .
The primary role of constructed types, however. would seem

to be that of a 'sensitizing device.' Its use allows sociologists
cognitively to map broad areas of sociological phenomenon
through the systematic tapping of historical and secondary data.
A type, in effect, constitutes a reduction from the complex to
the simple. hence the careful construction and use of types,

as an intermediate procedure, can potentially make many large-

scale problaems accessible to more refined methodology and
technique.

 

5McKinney and Kerckhoff, p. 133.

6McKinney and Kerckhoff, p. 135.

126

:NI 0:

2;:

p3?

:ml U:

Eu 3..

 

 

 

 

 

On

AN«

3

3

a“

 

'
I

«REC. uni—afloag mo gaseous .m 3qu

127

In this analysis the type-construction-methodology has been
used merely as an intermediate step and as a way of ordering the
data. Here we have been talking about the min. in the next chapter
we will go on to discuss the fi_r_m_. Then we will bring these two
together and try to determine to what extent they may fit logically

together.

CHAPTER VI

DYNAMICS OF COMPANY CHARACTERISTICS

Constructifl Types of Firms

 

In this chapter we will construct two polar types of firms.
We will then look at the cases and place various firms. according
to their characteristics, on the continuum bounded by the two polar
types. For the purposes of this analysis these polar firms will
be constructed on the basis of their strategy. 2 We will assume
that there is a continuum and locate firms on this continuum according
to the criteria to be discussed below. On this basis we will label

one polar type of firm a Rigid Firm and the other polar type an

Adaptive Firm.

 

1The theoretical justification for applying the ideal type method
of analysis to an abstraction such as a firm. company, or corporation
has considerable precedence. See D. Martindale, "Sociological
Theory & the Ideal Type. " op. cit.

2Strategy is used in a similar sense as defined by D. G. Moore
in discussing "Managerial Strategies. " "A strategy might be regarded
as one of the important influences in decision-making. The term plan
is much too static for our purposes unless qualified. There is not
enough of the idea of scheming or calculation with an end in view in it to
satisfy us. Plans are used to build ships. Strategies are used to
achieve ends among people. You simply do not deal strategically with

129

It is held that the construction of the types of firms can be
best done by classifying them on the basis of strategic behavior which
has changed the character of the firm. The following criteria have
been chosen as being significant in determining the character of the
firm. The criteria chosen are in the areas of (1) customer-mix, (2)
product-mix, (3) production methods, (4) concentration of production
facilities, (5) concentration of markets, (6) concrete plans for changes
in any of the foregoing areas. These criteria are not meant to be
exhaustive but rather indicative of the character of the firm in terms
of its strategies of adjustment and adaption to the relevant external
economic and social environment. These will be discussed in the

following section.

Criteria Chosen for Classifying Firms

 

l. Customer-Mix

 

In this area the focus is on the stability or change, over time,
in terms of sales to more than one type of industry. For example,
one company might initially sell to the big three of the automobile

industry and five years later these customers still will account for

 

inanimate objects. " op. cit. , p. 226. However, it should be noted
that in the context of the present chapter we are using the term in
connection with the total organization and not an individual manager.

130

over 80% of the total sales. Contrast this situation to a company
which starts with the same big three as customers but five years later
may have their customers located in four or five different industries -
autos, appliances, drugs, household goods, sports equipment.

The change in customer-mix will affect the marketing problems
and the internal organization. It is held that these two contrasting
patterns -- a static customer-mix vs. a changed one -- indicate a
different orientation and approach to the external environment by the
firms. To stay with one industry and group of customers through
upswings and downswings in the business cycle is one pattern. How-
ever, to actively search out, find, and successfully establish a working
relationship with customers in different industries having different
problems, values, and social structures is a different pattern.

It might be assumed that if a company has a product that can
be used in a number of industries, it will naturally attempt to sell
to all these potential customers. This is not necessarily so. In
many cases there are distinct differences between industries in
terms of accepted procedure and methods of doing business. In
addition, the individuals to be dealt with will be different and so a
personal relationship must be established and a reputation built.
Therefore, to go into other industries to develop customers takes

additional effort. Because of all these reasons it is held that change

131

in customer-mix is one clue to separating the Rigid Firm from the
Adaptive Firm.
2. Product-Mix

This criterion parallels the first. However. in the Customer-
mix a company might sell only one product but to a number of different
industries. In the product-mix category the company may be selling
only one or a number of different products. In the latter case these
products may be sold to different industries or may be sold to the
same industry. The use of product-mix as a criterion in distinguishing
types of firms is justified by the fact that various combinations of
product-mix will entail different organizational and marketing problems.

The first step in classifying the firms will be to distinguish
between those producing only consumer goods and those producing
only industrial goods.

The term consumer goods is used to indicate those goods
destined for the ultimate consumer that will be purchased in sub-
stantially the same form as they leave the factory. Industrial goods
are defined as those products which are to be converted into more
finished products. Relatively few of the companies in the sample are
involved in the production of consumer goods. However, because

of the diversity in industrial goods these will be further subdivided

132

on the basis of similarity of marketing problems. 3
a) Installation and Equipment

Installation: Major items of production equipment regarded

 

as part of the fixed plant, such as lathes, punches. etc.

Equipment: Not regarded as part of fixed plants such as

 

small motors, tools, portable drills, etc.

b) Semi-Manufactured Goods

Those items subject to additional changes in form when us ed
in manufacturing processes, such as extruded aluminum for windows,
lumber, and chemicals.

c) Parts

 

(Manufactured articles which can be installed as part of a larger
product without further processing; includes items like plastic parts,
chrome molding for cars, tubing in refrigerators and small motors.

d) Supplies

Items essential to a business Operation that are consumed in
a relatively short period of time, such as sandpaper, oils, polishing
compounds and wiping materials.

3. Production Methods

 

Production methods, for our purposes, can be best divided

into three different categories. Each is different enough in its

 

3‘This classification follows that develOped by Beckman and
Davidson, Marketing 7th ed, 1962 (N. Y. , Ronald Press Co. ), pp.
294-2950

133

effect on the character of a company to act as a distinguishing factor.
These three categories are the following:
a) Custom-made products produced for a specific customer.

b) Standardized products that are produced only after they
have been ordered by a customer.

c) Standardized products that are produced for inventory.

It is assumed that there are enough differencee in these three pro-
duction methods to cause significant variances in the character of

the firms using different combinations of them. For example,
"custom-made products” might be products that are turned out by
tool and die workers or are produced by building prototype models.
Such work requires a certain type of skilled workman. Also there are
unique requirements for producing products on this basis. For
example, the firm has to have a close and personal relationship with
its customers because of the needs for effective and immediate
communication regarding the products.

In contrast to this, a production item which is produced to
order entails different problems. An example of this type of
product would be stamped parts for automobiles or other machinery.
In this case the type of labor used can be semi-skilled production-
line labor. Also the relationship to the customer need not be close.

The way price is negotiated may be different. For example,

in the custom-made product, the price may be based mainly on a cost

134

plus basis. That is, the firm will bid on the basis of the amount of
skilled labor hours estimated for a job plus some percentage above

this to cover overhead and profit. Also in the production type of

item, the labor cost is a much smaller portion of the final cost of

the item, and therefore the cost of materials becomes a more important
item in bidding.

The third production method involves a standardized product
as in the second case above, but in addition to being produced to fill
an order it is also produced for inventory. That is, the firm will
produce or manufacture more items than are required to fill orders
on hand. This means the firm has to carry the risk of not being able
to sell the products in the future.

These three types of production methods will affect the internal
organization of a firm. The differenes evolve from the type of labor
required, pricing of products, and the importance of purchasing
materials. Also, the production methods involved in these three
categories will affect the external posture of the firm. For example,
in all three cases, the relationship between the firm and its customers
differs.

The essential point here is that the company that is involved
in all three types of production methods will have a greater variety of
problems to solve than the company that is in only one of these types

of production.

135

4. Concentration of Production Facilities

If the company has production facilities or plants dispersed
geographically this will, at the least, increase the problems of
communication and the delegation of authority and responsibility.
Therefore, it is held that the problems arising for a company that has
dispersed production facilities will be more complex than for a
company that has just one plant. It is held that this is another
element contributing to the differences in the character of any two
firms.
5. Concentration of Markets

The problems confronting a company marketing its products to
many foreign nations in contrast to a company selling in one small
community are different in terms of content and quantity. Between
these two extremes there are numerous possible situations. For
example, a company could limit its marketing efforts to one state,
a particular region such as the Midwest, or to the whole nation.
The target chosen, be it neighborhood, suburb, city, state. region,
nation, continent, hemisphere, or world will affect both the content
and quantity of the problems and opportunities that have to be met.
Therefore, it is held that this is a distinguishing element in evaluating

the character of a company.

136

6. Concrete Plans for Cham

This element or area is included to take into account the
fact that a firm may be planning a change in one of the preceding
factors but has found that,until this time, it has not been appropriate

for it to make this change.

Working Definitions of the Elements Makinp_

Up the Company Characteristics

 

It is necessary to set up working definitions4 to use in analyzing
the cases and to place the firms in one category or another in each
of the foregoing areas. If for the criteria, customer-mix, product-
mix, or production methods, the company has not changed or diversi-
fied significantly (to be defined below) from the time of its initiation
to the time of its interview, then we will give this firm a numerical
value of -1 and define this as a factor which would move the firm
towards the Rigid Firm end of the continuum. If there has been a
significant change, however, a +1 is assigned, which moves the
firm towards the Adaptive Firm end of the continuum. For factor
no. 4, Dispersed Production Facilities, no. 5,Dispersed Markets, and

no. 6, Concrete Plans for Change, if the answer is pp (to be defined

 

4See Chapter III.

137

Operationally below) to any of these items, a -1 value is given, which
will move the firm towards the Rigid end of the continuum. If the
answer is xe_s to any of these three, a +1 is given, moving the firm
towards the Adaptive end of the continuum.
1. Customer Mix

a) Same (-l)

Operationally, 335515 is defined as the state where a firm

is still selling approximately two-thirds of its total sales to the
same type of customers (that is, in the same industrial classification)
that it had during the initiation phase of the business. The U. S.
census S. I. C. classification was not used because the data were not
in this form. Rather, the judgment of the reader was used to designate
that one industry differed from another. This judgment was based
on the perception of the respondent as to whether or not he had moved
into a new type of industry. That is, if h_e considered it to be a
different type of industry, his belief was accepted.

b) Changed (+1)

2. Product Mix

 

a) Same (-1)
b) Diversified or changed (+1)
It should be recalled that products were divided into consumer

and industrial types of goods and that the latter were classified further

into four sub-types of industrial goods. In this section, a company
will be placed in the "diversified or changed" category if: 1) the company
started manufacturing only one of either consumer-goods or industrial-
goods and then, at the time of the interview, had added the other; or
2) if a firm which at the time of the interview is manufacturing industrial
goods only had added at least two of the sub-types of industrial goods
since it started in business. For example, if the firm started out
manufacturing two of the industrial sub-types and is now manufacturing
only three of the four items, then it would be placed in the "same"
category.
3. Production Methods

a) Same (-l)

b) Changed (+1)

In order to fill the requirements for the ”changed” category,
the firm would now have to be using all three methods of production
as defined in the previous section. If the firm at its initiation us ed
one of the production methods only and in the intervening time added
a second, it still would not be put in the category of changed. If,
however, the firm had moved from utilizing two of the methods to
utilizing three of the methods, it would be included in the "changed"

group.'

139

 

4. Dispersed Production Facilities
a) No (-l)
b) Yes (+1)

The cut-off point hereis quite clear. If a firm has production
facilities in two different geographic locations (minimumof three
miles apart) it is considered to have dispersed production facilities.

5. Dispersed Markets

 

a) No (-l)

b) Yes (+1)

In this category, if a firm sells outside of its own state it is
defined as having dispersed markets. The problem of a firm located
in a city on the border between two states did not arise and so was
not considered.

6. Concrete Plans for Chang:

 

a) No (-1)

b) Yes (+1)

As with the other criteria there was considerable judgment
used in placing a firm in this category. What the researcher looked
for was some evidence that there were concrete plans which would
lead to change or growth. That is, that there were plans already
made or already instigated and steps already taken for change in

one of the five preceding items. Mere wishful thinking, dreaming,

140

or conjecturing was not enough to put the firm in the ”Yes" category.
On the basis of the foregoing Operational definitions, firms were
assigned a +1 or -1 for each of the six criteria and tabulated in Table
4. The scores were totalled for each company. The distribution of
firms on the continuum is shown in Table 5. The +6 are those that
are closest in fit to the Adaptive Firm. The -6 are those that are
closest in fit to the Rigid Firm.
It is held that in light of the preceding criteria the "character"
of a firm with a -6 rating will be different from that of a firm with
a +6 rating. In relating to external economic and social environment,
the posture and strategies employed will be qualitatively different.
It is held that all of these criteria in combination are meaningful.
However, in using one criterion by itself we are on less firm ground.
The firms with a -6 rating and a -4 rating have only one criteria not
in agreement, as is the case with the +6 and the +4's. Therefore,
a closer examination and comparison of these firms will throw light
on the usefulness of the criteria in delineating qualitatively minor

differences among firms.

 

An Examination of the -4 Firms

A firm falling in the -4 range will have one element or factor

which moves it towards the Flexible end of the continuum. For three

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of the firms this was the second criteria, Product Mix. These three
firms had diversified their product-mix since their initiation phase.
Four of the firms have the ”Dispersed market" factor as the deter-
mining Flexible criterion.

Note that for the Rigid Firm with a -4 rating the only positive
factor falls under either dispersed markets (5.) or a change towards
a diversified product mix (2. ). However, their customer mix has
not changed and is not diversified. That is, they are still serving
the same customers in the same industry. Also, they are using
the same production methods. They have only the one production plant
and have no concrete plans for change in any of the foregoing factors.

An examination of the three firms that have had a change in the
product mix toward diversification (that is, they have added another
type of product) is interesting because it does not indicate a real
contradiction to the other criteria. For example, in the one case,
the individual started producing rubber stamps for companies. His
addition was a steel stamp which is very similar and is sold mainly
to the same types of customers. In addition to this, he added plastic
signs. As he says, "This is a complementary item for me. When-
ever I go some place and call on people with my rubber stamps, I
would ask them if they were interested in a plastic sign. This, to

me, is a means of diversifying. "

145

In the second case, the type of business started as a pattern
shop. Subsequently, this entrepreneur made a decision to go into
plastic tools. The entrepreneur was asked, "How did you get into
plastic tools? Do you have any background in this or in chemistry?"
The answer was:

Well, no. There isn't much to it, really. I've just learned
from the peOple we buy from, but the reason I got into it is this.
You see, when I started my shop we leased a small place. There
were, oh, about six pattern makers around here, and they had some
of these firms well tied up, so I had to do something. I couldn't
break into some of the firms; they were so closely tied in with
the established concerns. So, I decided a good strategy would
be to go into the plastic tooling; that is what I did.

In the third case, the firm started out making flat irons. How-
ever, they were selling this as a non-branded item to a company
which subsequently went out of business leaving them in very shakey
circumstances. The entrepreneur struggled along for about five years
trying to straighten out the affairs and make a business out of it.
Then in 1953 he got the idea of making automatic tire removal equip-
ment. This was about the time the tubeless tires came out and
there were considerable problems in getting suitable equipment to
remove this type of tire. He now manufactures tire removal equip-
ment for cars, sport cars, and trucks. In addition, he has done

some consulting work for the automobile industry producing equipment

for mounting tires onto the rim on a moving assembly line.

146

However, in terms of his growth orientation, he indicated that
he felt he had the best product in the industry. When asked, "Well,
if your product is so good, why can't you get to the top with an active
sales promotion?" he answered,

I prefer to build slowly. When you are at the top it is too

easy to come down. I would like to progress with the business
at this pace. I am not in much of a hurry provided I can stay
ahead of competition. I'm still interested in moving along
gradually. I've got plenty of room on the land around the plant
to expand but I don't foresee any major expansion in the next
five years. I'm third or fourth in size among those who compete
with me and I feel that this is a pretty comfortable position to be
in. -

In light of the foregoing discussion, we cannot claim with cer-
tainty that the -4 and -6 firms are qualitatively different in character.
Therefore firms falling in the -4 category will be grouped with the
-6 firms for the purposes of analysis. That is, in Chapter VII where

the man and the firm are brought together, the -4 and the -6 will be

grouped together for analysis.
An Examination of the +4 Firms

In this group, all of the firms have changed from their initial
character and moved to a position of diversification in customer-mix
and product-mix.

Only one firm of the +4's has not changed its production methods.

This firm buys sheet aluminum and fabricates it into finished awnings,

147

or sells the linial lengths and lets its distributors assemble the size
of awning required. This company is in a growth industry and has
been able to expand and diversify in customer-mix and product-mix
without changing the basic methods of production.

Only one company in this group of +4's does not have dispersed
markets. This company sells mainly in one state. However, this
firm is considering moving into EurOpe in production and sales.

The plans were well formed and then had to be shelved when the
Congo left Belgium and austerity strikes hit Brussels. Consequently,
it is reasonable to assume that a move in the direction of dispersed
markets can be expected.

Two of this group do not have more than one plant. Of these,
one produces mainly consumer products which are standardized,
relatively high priced, quite small in size and light in weight.
Therefore, because of low shipping costs, they can benefit from having
only one production plant which will give them the advantage of high
production runs. The other company also manufactures a product
which goes to the ultimate consumer in relatively unchanged form.

It produces kitchen cupboards and other items and delivers them to
major contractors and home builders throughout the Great Lakes
area with trucks owned by the firm. These products are also distributed

throughout the United States using commercial carriers.

148

It is surprising that three of the seven which would be considered
in the Adjustable Firm range do not have concrete plans for growth.
However, a closer inspection reveals that they can still be growth
oriented. For example, one firm has three subsidiary companies
which the entrepreneur has bought out in recent years. Thus, the
firm has gained product'diversification and customer diversification
by trading stock in the initial company to obtain the assets,customers,
and key personnel of smaller companies. This was the method of
growth up to the time of the interview. Although there were no
concrete plans for the purchase of another subsidiary at that time,
there also was no indication that this strategy would be discontinued.

In the second case, the firm had shown a growth orientation
in the past. However, at the time of the interview there were no
plans for further expansion. In response to the question, "Where
do you expect to go from here?" the entrepreneur answered,

Well, now that is the best question of all. I feel we have

leveled off; we have lost the urge to expand. The hazards

are greater than ever today. I feel that the basic incentives
are not there as they were in the start; the profit motive is
gone. There is some personal incentive to build an organi-
zation to satisfy the employees, but you can't get anywhere
trying to make profits now. Actually, we are not standing
still -- that would be death. Retirement? I just don't believe
in it! Retirement is just the same as death. I suppose one
could expand and if you wanted to sacrifice through selling

it again. This seems sort of negative to me. Here you are

only concerned with personal gain. I question whether it's
worth leaving a large fortune. It's not really good for your

149

kids -- they don't have any incentive. However you still

can make a fortune in capital gains if you want to. Myself?
I don't want to go outside for equity capital with this company
so I can't expand, although I must say that this field of pre-
cision machinery is expanding and growing. There is a lot
of new equipment in this business but it is just too costly to
buy; we're not advancing too fast and so in buying new equip-
ment it would be putting us in a worse position. You see
equipment loses its precision in about six months to a year
and so from then on you have to start fighting it and working
on it to get the necessary precision.

In the third case a similar pattern emerges as in the preceding
case. The firm was certainly growth oriented in the past. Again,
the entrepreneur expressed the feeling that the peak had been reached.
For example, in response to the question, "Now that you have a half- ‘
a-million-dollar business, where do you go from here?" he says:

That's a good question. I might add, in all these things
in starting a business, certain things happen which you have
to go along with. You have to take advantage Of the things
that happen. So, one goes along with the trend. In this type
of business, I am content to stay just as we are. Experience
has shown that when operations like this get too large, owner-
ship gets too far removed and they go bankrupt. This kind of
business requires a lot of personal attention both with customers
and Operations. There are very few large Operations such as
this. You can count them on the fingers of one hand.

In reSponse to the question, ”Do you have any plans about new
products?" he answered:

No, I don't have any particular plans about a new product.
I don't see much point in spending a lot of money developing
a new product because of this foreign competition. It's
overcrowding us from every angle. For this reason I wouldn't
attempt any new product -- particularly one which would take
considerable money to develOp. Of course, some small item
costing $2, 500 is different. But why Spend a lot of money when
they are going to copy it anyway?

150

In the light of the above discussion, we again cannot claim with
any degree Of certainty that there are qualitative differences in the
character of firms falling at the +4 or +6 positions on the continuum.
Therefore, the +4 firms will be grouped with the +6 firms in Chapter
VII, where the 31.3.“ and the f_i_r_rp are brought together for analysis.
Table 6 which follows shows the distribution of firms on the continuum

with -6 and -4 firms grouped together and the +6 and +4 firms grouped

together.

151

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CHAPT ER VII

THE MAN AND HIS FIRM: THE LOGIC OF FIT

In Chapters III and IV, we constructed two types of entrepre-
neurs, the Craftsman-Entrepreneur and the Opportunistic-Entrepre-
neur. It was assumed that they represent polar positions on a con-
tinuum that was constructed in the area being analyzed. In addition,
we constructed and described two types Of firms. Again, the assump-
tion was made that there is a continuum with the one polar type being
the Adaptable Firm and the other polar type, the Rigid Firm. Using
this method Of analysis, we arrived at the negative and positive
scores for the min and also for the f_i_r_rlrls_. These can now be plotted
on a plane with the coordinate set Of axes as shown in Table 7. (The
scores of the men were placed on the horizontal axis and the scores
of the firms were placed on the vertical axis. ) In the lower left-
hand corner of quadrant III fall the cases in which the entrepreneur
has a -15 score and his firm has a -6 score. Thus, the cases falling
in the left-hand corner of quadrant III are those of the C-E with a
Rigid Firm. Those falling in the upper right-hand corner Of quadrant

I are those of the O-E and the Adaptable Firm.

153

As can be noted in Table 7, there is a clustering of cases at
either end of a line drawn through the origin from the lower left-hand
corner of quadrant III to the upper right-hand corner of quadrant I.

As the cases plotted fall away from this line, they are moving
away from the situation where the characteristics of the individual
fit the characteristics of the firm. (For example, if there were a
case falling in the upper left-hand corner of quadrant II, this would
show a C-E associated with an Adaptable firm. ) There are a few
cases falling in quadrants II and IV that are a good distance from
the 45 degree line through the origin. An examination has been
made of these cases.

The examination seems to indicate that a new sub-type may
be appearing. For example, cases #22, 47, 20, 27, 25, 26, 28, 33,
17 and 16 appear to exhibit the characteristics Of another type of
entrepreneur. An apprOpriate name for this type might be Inventor-
Entrepreneur. In all of these cases the entrepreneur has taken out
a large number Of patents. It appears that his orientation is not to
attempt to build a business or to turn out the best product. Rather,
his major concern seems tO be to develop an organization, not as
an end in itself, but rather as a vehicle to allow him to invent and
produce various products.

This typical pattern seems to be as follows: The individual

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155

invented products or processes either as a part of his job or in his
spare time. In some cases the patents for his inventions were accepted
by his company and signed over to the company. In other cases he

did not feel that his ideas were properly accepted and put into use.

In the first case. where the individual's ideas were accepted, he
seemed to feel that he should start a business to gain more personal
benefit from these inventions. In the second case. where the individual's
ideas were not accepted to his satisfaction, he seemed to feel that he
should start a business so that he could prove the worth of his ideas.

In both cases, the motivating force to start a business was to provide

a proper vehicle for the inventions. A more detailed analysis of the

Inventor-Type is not included in the scope of this study.

A Comparison of Growth Between the C-E -- Rigi_d

 

Firm and the O-E -- Adaptable Firm

At the lower left-hand corner of quadrant III in Table 7 there
is a cluster of cases where the most typical C-E is associated with
the most typical Rigid firm. At the upper right-hand corner of
Quadrant I, there is a cluster of cases where the O-E is associated
with the Adaptable firm. The first group consists of twelve C-E's
who have Rigid firms and the second group consists of the ten O-E's

who have Adaptable firms. A comparison of the growth of the first

156

group to the growth of the second group will be made.

Because of the limitations on information resulting from the
use of unstructured interviews we do not always have complete
information on each firm. Therefore, we will take as an indicator
the gross sales volume of these firms. Table 8 shows the extent of
information we have on sales figures. These were gathered through
the interviews and through Dunn and Bradstreet reports. The most
complete sales figures are those of 1959 and 1960. Therefore. the
average sales for each group is based on 1960 and. where a 1960
figure is missing. on the 1959 figure.

A startling contrast between the growth of these two groups.
based on the average 1960 gross sales figures, is exhibited by a
bar graph in Table 9. The O-E with the Adaptable firm has an
average gross sales of twelve times that of the C-E with the Rigid
firm.

Another consideration that must be made in this comparison
of the two groups is the average number of years the firms have
been in business. 1 The C-E Rigid firm group has been in business
an average of 9. 5 years. The O-E Adaptive firm group has been in
business an average of 11. 9 years. Since the latter group has

attained average sales of twelve times that of the former group, it

 

1In Table 8 there is a note made beside each numbered firm

of the year the business started.

157

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Table 9. --Sales Comparison of Selected Firms

 

 

$6, 000, 000

 

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Av. Sales for 1960 Av. Sales for 1960
Av. No. of Yrs. in Av. No. of yrs. in

Business (9. 5) Business (11. 9)

CHAPTER VIII

CONC LUSIONS AND IMPLICATIONS

 

 

FOR FURTHER STUDY

This is an exploratory or formulative study with the goal of
evoking hypotheses rather than proving them. The analytical tool
of constructing ideal types has been us ed as a sensitizing device
to gain a better understanding of the individuals who are primarily
concerned with initiating, maintaining, and aggrandizing a company
and the type of firm that develops in association with the individual.
We do not say that we have proved with any degree of certainty that
the type of entrepreneur will determine the type'of company that
develops. Rather, we present a type of individual and a type of firm“
and indicate there is a strong tendency for the character of the firm to
reflect the type of entrepreneur who builds it.

We can say about the entrepreneur who falls in the lower left-
hand corner of quadrant III (Table 7, Chp. VII) that he has a technical
education in some formal institution and his work experience is
technical only. When he was an employee, his reference group was
not management. He did not have a sponsor or a role-model in

management. We can say that he has a very low level of social

161

involvement compared to the O—E. If he belongs to any associations
they will be professional in nature only. He belongs to few if any
community organizations. He is not effective in his ability to com-
municate. He realizes he has limited effectiveness in verbal and other
forms of communication in areas outside of the plant or practical
work-world.

He exhibits little flexibility or confidence in his ability to deal
with his economic and social environments. That is, he does not
delegate reSponsibility within his company to enable him to build an
organization of any great size. He hires individuals on a particularistic
basis, on personal recommendations and knowledge of individuals. He
expects these individuals to perform in a way much above usual stand-
ards. He utilizes very few sources of capital to initiate his business.
He relies exclusively on personal contact to gain customers. His
customers are those individuals whom he has develOped a close
personal relationship with over many years in his particular industry.
He does not perceive of various ways of approaching a market to
improve his competitive position. Rather, he limits his vision to
competing on price, quality and service reputation. His time orienta-
tion is to the present and to the past. This is evidenced by the fact
that he does not have a long-range plan to initiate his company, nor

does he plan to make any changes in the character of his company in

162

the future. In his employee relations he is paternalistic. This is
probably a result of his feeling that he has never really left the work-
force. He still wants to be just "one of the boys. "

We can say that the entrepreneurs who fall in the lower left-
hand corner of quadrant III exhibit the above characteristics. Also,
we can say that their firms exhibit certain characteristics which seem
to be appropriate in light of the major orientation of the entrepreneur.
That is, the orientation of the man seems to logically fit the orientation
of the company. For example, we can say that the customer-mix of the
firm will be essentially the same as it was when the company was
initiated. The product-mix will also be the same. Production methods
will not have changed. Neither production facilities nor markets will
be dispersed geographically. Rather, the firm will sell only to a
relatively local market. There will be no concrete plans to change
the character of the company.

We can also approximate the average gross sales attained by
these firms. We can see that the sales are much lower for this group
than for the upper right-hand group in quadrant I. Also, the charac-
teristics of this latter group, the OE-Adaptable firm, can be described
in terms that would be in complete contrast to the foregoing description

of the CE-Rigid firm.

163

In quadrants II and IV, the fit of £1331 and 23.3 are not on the
prOposed continuum. On reviewing these particular cases it seems
that perhaps there is a qualitatively different type of entrepreneur.

A cursory examination of these cases seems to indicate that we have
a type here that can be called Inventor-Entrepreneur. The qualifying
difference seems to lie in the motivation of this individual entre-
preneur to start his own company. The motivations of the C-E and

of the O-E can be briefly described as building a better product vs.
building a better company or organization. Neither of these motivations
fits the Inventor-Entrepreneur, and there is some indication that he
builds a company as a means to an end. To continue to invent and
have these inventions produced and us ed by industry appears to be

his main goal for initiating and maintaining the company. It appears
that a further study of these cases would be fruitful because a further
type could be constructed following the methodology used in construct-
ing the C-E and the O-E. However, to construct this Inventor-
Entrepreneur type is beyond the scope of this particular study.

A question could be raised about the validity of the conclusions
derived from this study. Might not the individuals falling in the lower
left-hand corner of quadrant III, who have been defined as the C-E
and their firms defined as being Rigid, fall there because of the

industry they are in and not because of their orientations and

164

characteristic behavior patterns. (This question cannot be raised
with respect to the group in the upper right-hand corner of quadrant I
s in c e by definition these firms are diversified into a number of
industries and in all cases cross industry lines.) This question can
be answered by looking at the eleven cases in this group and noting
that these firms are not all in the same industry but are in a number
of different industries. Some of them are manufacturing products
for the ultimate consumer, while others manufacture only industrial
products.

Another reason that the question does not seem to be valid is
that, among the O-E's in the upper right-hand corner of quadrant I,
we have some individuals who started out in the same industries as
some of the C-E's in the lower left-hand corner of quadrant III. The
entrepreneur associated with company number one started a tool-
and-die company in 1946 and now falls in the category OE -Adaptable
firm. In contrast, the entrepreneur associated with company number
thirty-three also started his company as a tool-and-die shOp. and
yet today, on the basis of our criteria, he falls in the category
CE -Rigid firm.

Similarly, it seems that there is no single industry that would
produce the Inventor-Entrepreneur. For example, a preliminary

analysis of the cases indicates that the Inventor-Entrepreneur is

165

located in such industries as drug manufacturing, signs, performance-
measurement instruments, electronic products, hydraulic accessories,
tools and supplies, automotive-spring manufacturing and heavy

machinery companies .

HYPOTHESES DERIVED FROM THIS STUDY

 

l. Hypothesis: There are at least two types of entrepreneurs which

 

can be differentiated on the basis of their orientation and character-
istic behavior patterns. These are polar types termed Craftsman-
Entrepreneur and Opportunistic-Entrepreneur.

"Entrepreneur" has been defined in the preceding chapters,
and the definition us ed is that posited by Cole. The term "type" is
defined as used by McKinney and Becker. The concept "orientation"
is used in the same sense as employed by Merton in his analysis of

local versus cosmOpOlitan influentials.

a) Sub -Hypothes es

 

(l) The C-E perceives and reacts to a limited range of
culture when compared to the O-E. Perceiving and
reacting to a limited range of culture is defined

Ojerationally as follows:

 

(a) The C-E exhibits narrowness in education and

training.

166

i) Formal education--technical only.
ii) Work experience--technical only.
iii) Reference group other than management.
iv) No management sponsor or role-model.
(b) The C-E exhibits low social awareness and low
social involvement.
i) Belongs to professional associations only.
ii) Limited effectiveness in communication ability.
(c) The C-E exhibits a lack of flexibility and confidence
in his ability to deal with the economic and social
environments .
i) Does not delegate authority or responsibility in
order to allow him to build a large organization.
ii) Hires on a particularistic basis.
iii) Does not utilize over two sources of capital for
the initiation of his business.
iv) Organizational sales made mainly on the basis
of personal contact and reciprocity.
v) Competitive strategy envisaged by the C-E
limited to quality, price, and reputation of the

company.

167

(d) The C-E exhibits a time orientation circumscribed
to the present and the past.
i) The C-E had no long-range plans for the
initiation of his company.

ii) Has no plans to change the basic character of
the company or attempt to bring about an
increase in growth rate.

iii) The C-E is paternalistic in his employee
relations.

(2) The O-E perceives and reacts to a broad range of culture.
Perceiving and reacting to a broad range of culture is

defined Operationallj as follows:

 

(a) The O-E exhibits breadth in education and training.
i) Formal education -- technical plus.
ii) Work experience -- technical plus.
iii) Reference group -- management.
iv) Management sponsor or more than one role-
model.
(b) The O-E exhibits high social awareness and high
social involvement.
i) Belongs to community associations as well as

profes sional as s ociations .

168

ii) Effective with many forms of communication.

(c) The O-E exhibits flexibility and confidence in his

ability to deal with the economic and social environ-

ment.

i) Delegates authority or responsibility in order

ii)

iii)

iv)

to allow himself to build a large organization.
Hires on a universalistic basis.

Utilizes over two sources of capital for the
initiation of his business.

Uses a variety of marketing methods to gain
customers.

Various competitive strategies are employed

in addition to price and quality.

(d) The O-E exhibits an awareness and orientation to

the future.

1)

ii)

iii)

The O-E makes long-range plans to initiate the
company when the time is ripe.

The O-E makes plans for his company's growth.
The O-E is not paternalistic in his employee

relations .

169

2. Hypothesis: The character of the organization will reflect the

 

orientation of the entrepreneurial type associated with it.
a) The C-E will build an organization which can be termed Rigid
in character.
b) The O-E will build an organization which can be termed
Adaptive in character.

3. Hypothesis: The Adaptable Firm that has associated with it an

 

O-E will show a higher growth rate in terms of sales than the Rigid

Firm that has associated with it the C-E.

IMPLICATIONS

 

In the initial analysis of the unstructured interviews a premature
specification of the problem was made. It seemed upon first exami-
nation that there were two types of entrepreneurs based on differences
in their orientation to growth, namely growth-oriented entrepreneurs
and non-growth oriented entrepreneurs. This line of thought was
followed for some time. However, it was finally discarded because
of its limited scope in enhancing understanding of these individuals
and their behavior. Rather, it was found that the types of entrepre-
neurs could be delineated on a much broader basis. That is, the
difference between these types was more than just the orientation to

growth although this was one factor or element in their orientation.

170

As was indicated in the previous chapters, these individual entrepre-
neurs were different in many ways. Within the limitations of the data.
the differences between the entrepreneurs, the effect on the type of
company they build, and the effect on sales have been demonstrated.
With this broader focus, additional light can be thrown on some
constructs that have been developed by other writers in the field.
Using only the undimens ional focus of the growth-oriented versus
the non-growth oriented entrepreneur does not allow one to analyze
these constructs. For example, Leland J enks, in discussing entre-
preneurial type-s, breaks them down into two polar types which he
calls the "owner-manager and the entrepreneurial-executive. "1 He
says of the first type:
In this situation one individual personally buys and sells,

procures capital and invests it in plant and equipment, hires

and manages his employees directly, and carries on any

relations that there are with competitors, government, and

various community agencies. . . . The opposite pole is

approximated by what Knauth and others have been saying

about the contemporary giant corporation. In this it appears

that a managerial group with no ownership function share

or even to some extend divide the responsibility of making

the decisions which may be called entrepreneurial, and to
delegate to others virutally all performances by which

 

1Jenks, Leland H. , "Role Structure of Entrepreneurial Person-
ality, " in Change and The Entrepreneur; Research Center in Entre-
preneurial History, Harvard University Press, 1949, p. 110—113.

 

171

decisions are made effective. Apart from managing immediate
subordinates, their actions within their business unit tend

to reduce merely to making crucial decisions and coordinating
activities on a company-wide scale. Even these latter
processes involve 'the organization' to a great extent. At

the same time, such high executives are increasingly called
upon to act outside the organization, on its behalf, with respect
to affairs of the larger community. . . . Whether personality
is viewed as a resource for or produce of these two typical
situations, we should expect a great deal of difference between
the individuals involved, even when in the same field of endeavor
in the same time and place.

In the first place, as Professor Cole's essay makes clear, the
conception of a 'business unit' (firm, business, going concern,
enterprise) is a commonly implied element in entrepreneurial
actions. The notions of 'owner-manager' and 'business execu-
tive, ' as commonly phrased, are specifically relative to such
an entity. It is first of all the difference in what they do with
respect to such a firm that make the 'owner-manager' and the
'entrepreneurial-executive' seem so different.

It is in the name of and for the initiation, maintenance,
aggrandizement, or other change in such business units, our
definition asserts, that individuals exercise the functions of
entrepreneurship.

In this somewhat protracted quote, the important aspects to us
are the fact that J enks makes the distinction between the "owner-
manager” and the "entrepreneurial-executive" and notes that there
are differences in requirements of personality for functional perfor-
mances. He holds that one would expect differences between individuals
fulfilling these two different roles and that these differences affect
(what they do with respect to a firm during the stages of initiation,

maintenance , and ag gr andiz ement.

172

The preceding is what we have demonstrated within the limitations
of our data. We showed that there are entrepreneurial types with
different orientations and background and consequently that the C-E
and the O-E, are different in terms of their behavior patterns. Because
of these differences the C-E and the O-E develOp companies which have
different characters (in relating to their relevant environments).
Therefore, our conclusion is that, if the firm is to go through the
phases of initiation, maintenance, and aggrandizement, it is necessary
that the entrepreneur move from a position of being "owner-manager"
to being an "entrepreneurial executive. " With the aggrandizement of
the firm (the growth in terms of sales, etc. ), it is apparent that the
complexities of the entrepreneur's job will increase. He will have to
delegate. authority, responsibility and utilize his organization as a
vehicle. He will have to, in the terms of Jenks, reduce his activity
to more or less making crucial decisions and coordinating activities
on a company-wide scale. He will no longer be able to go out into the
plant and get his fingernails dirty. As we have shown, the social
personality and orientations of theC-E are not conducive to this

behavior. We can hypothesize therefore that the C-E will not be able

,
\.

to take his firm beyond the stage of maintenance because this requires
an increased complexity in role structure which he is not able to handle.

We can diagram this as in table 10.

173

Table 10. --Comp1exity of the Entreprenurial Role Structure Related

to the Developmental Phases of the Firm

IIIIIIIII IIIII'IIIIIIIIIIIIIIIII'I'IIII'IIIIIIIII'IIII-IIIIIIIIIII8lIIIIIII

 

 

.[NITIATION MAINTENANCE AGGRANDIZEMENT

 

 

.aj

/\
V

”Owner-

Executive"
Manager”

ntrepreneun
Behav1or
Patterns

 

"Entrepreneurial-

C

174

Another dimension of this relationship between the entrepre-
neurial types and the develOpmental phases of a firm is delineated
by Cole2 in the art of decision making. He breaks down the types
of decisions required for a company to go through the stages of
initiation, maintenance, and aggrandizement. He says that these
decisions can be classified on the basis of the objectives according
to their economic character. Decisions can be classified as to
whether they are (1) management, (2) adjustment to external
conditions, and (3) innovations. Management consists of the routine
decisions which keep the business going. The adjustments to external
conditions are not usually routine and would include such decisions
as price changes to meet competition, imitations of others' technical
processes, and so on. The second type of decision requires more
business judgment than the first. Cole perceives of the third type,
innovations, as being the most important because it is related to
the economic process and to the business cycle where entrepreneurial
judgment of the highest order is required. If we plot against this
the stages of development of initiation, maintenance and aggrandize-

ment as posited by Cole, we can then place our entrepreneurial

 

Cole, Arthur H. , ”Entrepreneurship and Entrepreneurial
History, " hange and the Entrepreneur: Ed. Research Center in
Entrepreneurial History (Cambridge, Mass. : Harvard University
Press, 1949), pp. 94-96.

 

175

types in this grid. This will help us see how far the different types
of entrepreneurs can go along these stages of development in light
of their decision-making ability. We can diagram this as shown in
table 11.

In light of the foregoing study and hypothesis that the C-E is
least effective when it comes to the innovative type of decision, the
entrepreneurial judgment as defined by Cole is of a lower order
for the C-E than for the O-E. This seems logical in light of our
hypothesis that the C-E is oriented to and perceives a narrow range
of culture. Also, in terms of his adjustment to the external environ-
ment he would probably not be as effective as the O-E. The C-E
would be able to adjust only to a relatively unchanging external
environment. His whole career has been spent learning the apprOpri-
ate values and behavior patterns of his chosen industrial social

structure and he cannot easily adjust to major changes in this.

176

Table 11. --Level of Judgment in Economic Decisions Related to the

Developmental Phases of the Firm

 

 

Amount of
Judgment
Required
for Decision

Level 3 -
(Innovations)

Level 2 -
(Adjustment to
external condi-
tions)

Level 1 -
(Routine Man-
agement De-
cisions)

 

E E a”
5 5 a?
5 : .,v
i VI!) t
a x a
: ' :
E . : m
gs WC'E’KQ‘¢:FI r
w is E
«‘7 5“: i
‘7 6° 5 s
.s a :

 

INITIATION MAINTENANCE AGGRANDIZEMENT

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