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This article explores the concept of risk and the analysis is supported by nine case studies carried out using the longitudinal-processual research method. Attention focuses on two questions: Is risk a function of personality or is it shaped by contextual forces over time? How is risk managed by entrepreneurs during the strategy formation process? The article suggests that risk-taking is related to factors such as innate personality traits and personal learning in a business context, as well as factors such as the nature of the operating environment, nature of the business, crisis and presence of partners.
It is argued that risk-taking is composed of two main elements - the perception of risk and the capacity to bear risk - which seem to evolve over the course of business development. Instead of viewing risk as a one-dimensional construct, as a fixed personality trait, the study concludes that a multidimensional approach to risk-taking should be adopted in future studies.
The Literature on Risk-taking
The importance of the small firm sector to the Irish economy has long been recognised, and over the past decade many successful companies have been profiled in the media; this has helped to raise consciousness of the role played by individuals who are prepared to assume the risks of business start-up and growth. The growing interest in entrepreneurship is also reflected in the academic world and there has been a marked increase in the number of books, articles, case studies and conferences on the subject of entrepreneurship.
The aim of this study was to explore how entrepreneurs think about risk and deal with it in the strategy formation process. The main research questions were as follows:
(i) Is risk a function of personality or is it shaped by contextual forces over time?
(ii) How is risk managed by entrepreneurs during the process of forming a business strategy?
The trait approach dominates the literature on entrepreneurship and risk-taking. The ability to bear risk has been identified as the primary challenge facing entrepreneurs (Knight, 1921). Since entrepreneurship is a 'unique occupation characterised by risk-taking' (Cromie, 1994, p. 64), numerous attempts have been made to measure the risk-taking attribute of entrepreneurs (Palmer, 1971; Brockhaus, 1980; Sexton and Bowman, 1983; Begley and Boyd, 1986; McGrath et...