Transcript Entrepreneurship and innovation

Entrepreneurship and
innovation
b.v.l.narayana
Conceptual ambiguity
• Who is an entrepreneur?
• Essential characteristics of entrepreneur?
• Which firms can be called entrepreneurial
ventures?
• Benefits of entrepreneurship?
definitions
• Schumpeter (1934) on Entrepreneur
– Individuals who carry out new combinations of
means of production
• Entrepreneurship = self employment
=>50%people prefer self employment
– Which firms can be called entrepreneurial
ventures?
– Vesper (1980)
• Introduction of new good; new methods of
production; new market; new sources of supply;
industrial reorganization.
Moving Away From Existing
Theories
• Entrepreneurship: Discovery, evaluation, and exploitation
of future goods and services
• Entrepreneurial Opportunities
– Situations in which new goods, services, raw materials, markets
and organizing methods can be introduced through the formation
of new means, ends, or means-ends relationships
• Non-entrepreneurial decisions maximize scarce
resources across previously developed means and ends
• Entrepreneurial Decisions = creative decisions
Definitions (Carland et.al, 1984)
Entrepreneur
Small Business owner
•Establishes and manages a •Establishes and manages a
business for principal
business for principal
purpose of profit and growth purpose of furthering
personal goals.
•Characterized by innovative •Business primary source of
income and consumes
behaviour
majority of one’s time and
resources.
•Will employ strategic
management practices in the •Business perceived as
extension of personality,
business
family needs, desires.
Definitions (Carland et.al, 1984)
Entrepreneurial venture
Small business venture
•Engages in behaviour
that is aimed at
profitability and growth.
•Business characterized
by innovative strategic
practices
•Independently owned and
operated
•Not dominant in its field.
•Doesn’t engage in any new
marketing or innovative
practices.
What makes an entrepreneur
• Burns 1999
• A successful entrepreneur utilizes four key
principles
• Belief in ones ability to succeed
• Prioritized relevant learning
• Proactive approach
• perseverance
• To this add (bill Bolton 2000)
• Talent , temperament and technique
What makes an entrepreneur
• The factors can be classified as
• Personality factors
• Motivation and emotion– gives the drive and
purpose and self confidence (whybrow 1999)
• High need for achievement( Roberts 1991)
• Competitiveness – main motivator
• Need for independence
• Behavioral characteristics( kuratko and
hodgetts 1998)– perseverance, determination,
take calculated risks, creativity, honesty and
integrity, initiative, taking responsibility
What makes an entrepreneur
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Environmental factors( Roberts 1991)
Family background – fathers career, inheritance
Education – not important, start at early age
Work experience– important
Action factors– what entrepreneurs do
Are creative and innovative
Spot and exploit opportunities
Find resources to exploit opportunities
Manage risk, create capital
are good net workers, determined
Types of Opportunities
Sources of Opportunities
• Information asymmetry vs. exogenous shocks
– Exogenous shocks: spurred by govt. action, triggered by
demographic changes, generated by creation of new
knowledge
• Knowledge based opportunities: opportunity conditions,
appropriability, cumulativeness, nature of knowledge
– Information Asymmetry: Arising out of incongruities
• Between micro behavior and macro outcomes
• Between reality of an industry and generally accepted assumptions
• Between efforts of an industry and particulars of consumer demand
• Internally within rhythm or logic of a key industry process
Source of Opportunity
Sources of Opportunities
• Supply vs. demand side changes
– Focus till date on supply side changes (backward integration,
process changes)
– Demand side changes also offer promise (shifts in culture,
perception, tastes, or moods) especially in growing markets
• Productivity enhancing vs. rent-seeking
– Conventional reference to productivity enhancing
– Private rent-seeking: generate personal value, but no social value
(crime, piracy, corruption)
• Initiator of the change
– Non-commercial entities (govt. or universities); existing commercial
entities (incumbents, suppliers, customers); new commercial entities
(independent entrepreneurs, diversifying entrants)
Entrepreneurial approach to planning
• Survey result: successful entrepreneurs spent
little time researching and analyzing.
• Longevity of new venture not correlated with
planning.
• More attuned to seize opportunity
• Speed and partial analysis highlights of such
process.
Parsimonious Planning and Analysis
• Need based planning and analysis backed by subjective
judgment.
• Comprehensiveness is not the aim.
• Oriented towards customer’s buying habits and methods of
products use.
• Turbulent conditions calls for quick response with partial
information.
Integrated Action and Analysis
• Action and analysis go hand-in- hand.
• Advantages of early action
– Sets example for others: leading from the front
– Provides useful insights for mid course correction as
events unfold.
– Allows time for innovative problem solving.
• “Analysis is an exercise in what to do next more
than what not to do”
A framework for describing new
venture creation
Individuals
Environment
Organization
Process
Definition:
New Venture creation is the organizing of new organizations.
To organize is to assemble ongoing interdependent actions into
sensible sequences that generate sensible outcomes (Weick, 1979).
Categorization: Dimensions
Individuals
Need for achievement
Locus of control
Risk taking propensity
Job Satisfaction
Environment
Previous work experience
Venture capital availability
Presence of experienced entrepreneurs Entrepreneurial parents
Age
Technically skilled workforce
Education
Accessibility of suppliers
Accessibility of customers or markets
Govt influences
Proximity of universities
Availability of land or facilities
Accesibility of transportation
Attitude of the area population
Availability of supporting services
Living conditions
Occupational & industrial differentiation
More recent immigrants in population
Large industrial base
Availability of financial resources
Barriers to entry
Process
Existing competitors
Locate a business opportunity
Substitute
Accumulate resources
Bargaining power buyers/suppliers
Market products and services
Produce the product
Build an organization
Respond to govt and society
Organization
Overall cost leadership
Differentiation
Focus
The new product or service
Parallel competition
Franchise entry
Geographical transfer
Supply shortage
Tapping unutilized resources
Customer contract
Becoming a second source
Joint ventures
Licensing
Market relinquishment
Sell off of division
Favored purchasing by govt.
Governmental rule changes
recapitulation
• Innovation is introduction of new ideas ,
goods, services and practices which can
be exploited commercially.
• Is conversion of knowledge and ideas into
a benefit
• Innovation is the tool employed by
entrepreneurs
• Entrepreneurship is the process by which
new ventures are created