Lecture 1 Entrepreneurship

8/12/2019 Lecture 1 Entrepreneurship

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New Venture Creation and

Control MechanismProfessor Alexander Settles

[email protected]


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Introduction to the Course

New Venture Creation Entrepreneurship / Research on

Entrepreneurship Innovation Business Planning Finance

Organization Theory and Entrepreneurshipand Innovation


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Course Design

Requirements Attendance, Participation and Readings Personality Assessment Innovation Journal Assessment of New Venture or

Entrepreneurial Policy/Action (in Groups)

Exam


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Entrepreneurship


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EntrepreneursChallenging the Unknown

Entrepreneurs

Recognize opportunities where others see

chaos or confusion Are aggressive catalysts for change within

the marketplace

Challenge the unknown and continuouslycreate the future


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Entrepreneurship: A Mindset

Entrepreneurship is more than the merecreation of business:

Seeking opportunities Taking risks beyond security

Having the tenacity to push an idea through to

reality Entrepreneurship is an integrated concept

that permeates an individuals business in

an innovative manner.


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The Evolution ofEntrepreneurship

Entrepreneur is derived from the Frenchentreprendre , meaning to undertake.

The entrepreneur is one who undertakes toorganize, manage, and assume the risks of abusiness.

Although no single definition of entrepreneurexists and no one profile can representtodays entrepreneur, research is providing anincreasingly sharper focus on the subject.


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A Summary Descriptionof Entrepreneurship

Entrepreneurship (Robert C. Ronstadt) The dynamic process of creating incremental wealth.

This wealth is created by individuals who assumemajor risks in terms of equity, time, and/or careercommitment of providing value for a product orservice.

The product or service itself may or may not be new orunique but the entrepreneur must somehow infusevalue by securing and allocating the necessary skillsand resources.


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An Integrated Definition

Entrepreneurship A dynamic process of vision, change, and creation.

Requires an application of energy and passion towards thecreation and implementation of new ideas and creativesolutions.

Essential ingredients include: The willingness to take calculated risks in terms of time,

equity, or career.

The ability to formulate an effective venture team; the creativeskill to marshal needed resources.

The fundamental skills of building a solid business plan.

The vision to recognize opportunity where others see chaos,contradiction, and confusion.


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An Integrative Model of Entrepreneurial Inputsand Outcomes

Source: Michael H. Morris, P. Lewis, and Donald L. Sexton, Reconceptualizing Entrepreneurship:

An Input- Output Perspective, SAM Advanced Management Journal 59, no.1 (Winter 1994): 21 31.


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Entrepreneurs in the UnitedStates

Reasons for the exceptional entrepreneurialactivity in the U.S. include: A national culture that supports risk taking and

seeking opportunities. Americans alertness to unexploited economic

opportunity and a low fear of failure.

U.S. leadership in entrepreneurship education at boththe undergraduate and graduate level.

A high percentage of individuals with professional,technological or business degrees who are likely tobecome entrepreneurs.


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Entrepreneurial Firms Impact

Entrepreneurial components of the U.S.Economy:

1. Large firms have increased profitability by returning to

their core competencies through restructuring anddownsizing.

2. New entrepreneurial companies have beenblossoming in new technologies and new markets.

3. Thousands of smaller firms established by women,minorities, and immigrants have strengthened theeconomy.


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Entrepreneurial Firms Impact

Entrepreneurial firms make twoindispensable contributions to an economy:

1. They are an integral part of the renewalprocess that pervades and defines marketeconomies.

2. They are the essential mechanism by whichmillions enter the economic and socialmainstream of society.


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Aspects of Entrepreneurship

VentureFinancing

SocialEntrepreneurship

CorporateEntrepreneurship

Trends inEntrepreneurship

Research

EntrepreneurialCognition

GlobalEntrepreneurial

MovementFamily

Businesses

Womenand Minority

Entrepreneurs

EntrepreneurialEducation


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Common Characteristics ofEntrepreneurs

Commitment,determination, andperseverance

Drive to achieve

Opportunity orientation

Initiative andresponsibility

Persistent problemsolving

Seeking feedback

Internal locus of control

Tolerance for ambiguity

Calculated risk taking

Tolerance for failure

High energy level

Creativity andInnovativeness

Vision

Self-confidence andoptimism

Independence

Team building


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Outline of the EntrepreneurialOrganization

Imagination

Flexibility Acceptance

of Risks


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Entrepreneurship Theory

Entrepreneurs cause entrepreneurship. Entrepreneurship is a function of the

entrepreneur:

Entrepreneurship is the interaction of skills

related to inner control, planning and goalsetting, risk taking, innovation, realityperception, use of feedback, decision making,human relations, and independence.

( )E f e


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Typology of Entrepreneurial Styles

Source: Thomas Monroy and Robert Folger, A Typology of Entrepreneurial Styles:

Beyond Economic Rationality, Journal of Private Enterprise IX(2) (1993): 71.


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The Dark Side ofEntrepreneurship

The Entrepreneurs Confrontation withRisk

Financial risk versus profit (return) motivevaries in entrepreneurs desire for wealth.

Career risk loss of employment security

Family and social risk competingcommitments of work and family

Psychic risk psychological impact of failure

on the well-being of entrepreneurs


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Source : Douglas W. Naffziger, Jeffrey S. Hornsby, and Donald F. Kuratko, A Proposed

Research Model of Entrepreneurial Motivation, Entrepreneurship Theory and Prac t ice(spring 1994): 33.

A Model of EntrepreneurialMotivation


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Opportunity Identification:The Search for New Ideas

Opportunity identification is central toentrepreneurship and involves:

The creative pursuit of ideas The innovation process

The first step for any entrepreneur is the

identification of a good idea. The search for good ideas is never easy. Opportunity recognition can lead to both

personal and societal wealth.


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Entrepreneurial Imaginationand Creativity

How entrepreneurs do what they do:

Creative thinking + systematic analysis =success

Seek out unique opportunities to fill needsand wants

Turn problems into opportunities Recognize that problems are to solutions

what demand is to supply


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The Role of Creative Thinking

Creativity The generation of ideas that result in the

improved efficiency or effectiveness of asystem.

Two important aspects of creativity exist: Process

The process is goal oriented; it is designed toattain a solution to a problem.

People The resources that determine the solution.


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The Critical Thinking Process


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The Creative Climate

Characteristics of a creative climate: A trustful management that does not overcontrol the personnel

Open channels of communication among all business members

Considerable contact and communication with outsiders

A large variety of personality types

A willingness to accept change

An enjoyment in experimenting with new ideas

Little fear of negative consequences for making a mistake

The selection and promotion of employees on the basis of merit

The use of techniques that encourage ideas, includingsuggestion systems and brainstorming

Sufficient financial, managerial, human, and time resources for

accomplishing goals


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Country Level Competitiveness

2009 World Economic ForumGCI 20082009

Country/Economy Rank Score Rank*Switzerland 1 5.60 2United States 2 5.59 1Singapore 3 5.55 5Sweden 4 5.51 4Denmark 5 5.46 3Finland 6 5.43 6Germany 7 5.37 7Japan 8 5.37 9Canada 9 5.33 10Netherlands 10 5.32 8China 29 4.74 30India 49 4.30 50Brazil 56 4.23 64Russian Federation 63 4.15 51

The Global Competitiveness Index 20092010 rankings and 20082009 comparisons

GCI 20092010


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Economy Ease of Doing Business Rank

Singapore 1

New Zealand 2

Hong Kong, China 3United States 4

United Kingdom 5

Denmark 6

Ireland 7

Canada 8

Australia 9

Norway 10

Georgia 11

China 89Bangladesh 119

Russian Federation 120

Costa Rica 121

Brazil 129

India 133


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Innovation Rankings INSEAD 2009

1. United States2. Germany

3. Sweden4. United Kingdom5. Singapore

6. South Korea7. Switzerland

8. Denmark9. Japan10. Netherlands


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Russias Innovation Capacity

64. Vietnam65. Trinidad and

Tobago

66.Mauritius67. Panama68. Russia69. Romania70. Nigeria

29. Estonia42. Lithuania57. Azerbaijan59. Uzbekistan

60. Latvia72. Kazakhstan79. Ukraine98. Georgia104. Armenia112. Tajikistan116. Moldova122. Kyrgyzstan


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Russia Components

Legacy of innovation - 49 Culture to innovate - 46

Quality of the educational system - 41 Quality of management schools 66 Intellectual property protection 93

Technological awareness - 91 Firm level technology absorption - 90


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United States

Human Capacity 1 Culture to innovate - 2

Quality of the educational system 3 Quality of management schools - 10


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Innovation and the Entrepreneur

Innovation:

Is the process by which entrepreneurs convertopportunities into marketable ideas.

Is a combination of the vision to create a good ideaand the perseverance and dedication to remain withthe concept through implementation.

Is a key function in the entrepreneurial process.

Is the specific function of entrepreneurship.


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The Innovation Process

Types ofInnovation Invention

Extension

Duplication

Synthesis

Sources of Innovation Unexpected

occurrences

Incongruities Process needs

Industry and marketchanges

Demographic changes

Perceptual changes

Knowledge-based

concepts


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Type Description Examples

Invention Totally new product, service,or process

Wright brothers airplaneThomas Edison light bulb

Alexander Graham Bell telephone

Extension New use or differentapplication of an alreadyexisting product, service,or process

Ray Kroc McDonaldsMark Zuckerberg FacebookBarry Sternlicht Starwood Hotels &Resorts

Duplication Creative replication of anexisting concept

Wal-Mart department storesGateway personal computersPizza Hut pizza parlor

Synthesis Combination of existingconcepts and factors into anew formulation or use

Fred Smith Fed ExHoward Schultz Starbucks


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Major Innovation Myths

Myth 1: Innovation is planned and predictable Myth 2: Technical specifications should be

thoroughly prepared

Myth 3: Creativity relies on dreams and blue- sky ideas

Myth 4: Big projects will develop better

innovations than smaller ones Myth 5: Technology is the driving force ofinnovation success

Lecture 1 Entrepreneurship

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