Relationship between Entrepreneurs' Psychological Capital and Their Authentic Leadership

What is required to create and sustain a successful new business venture? A long list of necessary elements has been suggested and explored, including financial resources (e.g., Cooper et al, 1994), solid market analysis (e.g., Darling et al., 1997), strong social support networks (e.g., Dubini and Aldrich, 1991), and certain personality characteristics (e.g., Brockhaus and Horwitz, 1986). To date, however, the emerging concepts of positive psychological capital (Luthans et al, 2004; Luthans and Youssef, 2004) and authentic leadership (Avolio et al, 2004; Luthans and Avolio, 2003) applied to entrepreneurship have not yet been explored. In fact, while the pivotal role of business founders has been widely acknowledged in the study of entrepreneurship, very little attention has been given to their psychological or leadership capacities (Daily et al, 2002). The same is true of the organizational behavior and leadership literature, with limited attention given to the founders of newer, smaller organizations, despite recognition of the quantum differences between emerging and established companies (Miller and Friesen, 1984). This article urges recognition of the leadership challenges faced by entrepreneurs, and explores the link between entrepreneurs' positive psychological capital and leadership approach. Although each has generally ignored the other, the fields of entrepreneurship and leadership have arguably been among the most explosive within recent years. How to create and sustain new organizations is viewed as critically important in today's global economy. There is also growing support that positive psychological and leadership capabilities are crucial for organizational success and sustainable competitive advantage (Luthans and Youssef, 2004; Pfeffer, 1998). Yet, while the call for expanding the study of leadership within the context of newer, smaller organizations has existed for over a decade (Cooper, 1993), to date--especially as related to positive psychological capacities such as hope, optimism, and resiliency-no empirical research exists. Thus, this study addresses this void by examining how positive psychological capital of business founders as identified by Luthans and colleagues may be linked to dimensions of their authentic leadership as identified by Avolio and colleagues. While direct organizational performance outcomes are not included in this study, the findings from this exploratory study can serve as a point of departure for future research focused on the link between the authentic leadership of entrepreneurs and sustained competitive advantage of their enterprises. This article begins by acknowledging the leadership demands placed on entrepreneurs and the need to more fully integrate leadership and entrepreneurship studies. Then, the concept of authentic leadership is described, followed by a discussion of the hypothesized relationships between authentic leadership and positive psychological capital (including the constructs of optimism, resiliency, and hope). The methodology and results of the study are then outlined. The article concludes with a discussion of practical implications and future research. ENTREPRENEURS AS LEADERS The ability to motivate others has been identified as being critical to an entrepreneur's success (Eggers and Smilor, 1996). This focus on the human element of entrepreneurship, including the challenges and rewards of effectively others, is also given surface attention in the entrepreneur literature--the difference between managing and leading (Robbins, 2002), ways to become a caring leader (Davis, 2002), and the importance of cultivating the trust and commitment of employees (Hiam, 2002). With few exceptions, however, leadership issues have not been of primary emphasis in entrepreneurship research. One of the few would be Chandler and Hanks' (1994) study that indicated venture capitalists consider a business founder's demonstrated leadership ability to be critical when determining whether or not to provide funding for that founder's new venture. …