INTRODUCTION TO ENTREPRENEURESHIP Entrepreneurship, the Entrepreneur and the Owner-Manager 1
PSM523 Entrepreneurship and Public Enterprise Management, Africa University,
Learning Objectives ď‚— At the end of this unit you will be able to: 1. Appreciate why entrepreneurship is also called the third
option 2. Define entrepreneurship an understand that there is no
consensus concerning the definition of entrepreneurship 3. Understand the difference between the entrepreneur and the
small business owner- manager 4. Develop an understanding of the main approaches to 2
understanding the nature of entrepreneurship. In particular, the distinction between PSM523 Entrepreneurship and Public the entrepreneur as a performer of Enterprise Management, University, managerial tasks,Africa as an agent of economic change and as a
Introduction to Entrepreneurship The third option is the option for an individual to be self
-employed and/or to be the employer of others (to become an entrepreneur). With the growing unemployment and tough competition for
jobs, the third option has now become a necessary choice for each individual1. The word entrepreneur is derived from French words
meaning “between” and “to take” thus an entrepreneur is one who takes a position between a supplier and a customer- one who ‘takes the risk’ literally, that will succeed. 3
PSM523 Entrepreneurship and Public Enterprise Management, Africa University,
Economic Trends Influencing Entrepreneurship Entrepreneurship emerged as a leading economic force
during the 1980s and the 1990s A number of changes to the world economy have
contributed to this development and these include: Technology is assuming an increasingly important role World competition is more open and spirited than ever Thousands of jobs are being eliminated through the practice of
downsizing. Deregulation of many industries saw the entry of many small 4
firms into industries that used PSM523 Entrepreneurship and Public Enterprise Management, Africa University, companies.
to be dominated by giant
What is Entrepreneurship? According to Professor Jeffrey A. Timmons “Entrepreneurship is a human, creative act that builds
something of value from practically nothing. It is the pursuit of opportunity regardless of the resources or
lack of resources, at hand. It requires vision and passion and commitment to lead others in
the pursuit of that vision. It also requires a willingness to take some calculated risks”.
Kirzner, an Austrian economist defined entrepreneurship as 5
“theEntrepreneurship competitive and behaviours that PSM523 Public Enterprise Management, Africa University,
drive the market process.
Overview of Entrepreneurship Process
Realizing Value Resources, Decision- Making, Innovation Opportunity Identification
6
PSM523 Entrepreneurship and Public Enterprise Management, Africa University,
Other Definitions of Entrepreneurship
7
1.
Entrepreneurship is a way of thinking, reasoning and acting that is opportunity-based, holistic in approach and leadership balanced. It results in creation, enhancement, realisation and renewal of value not just for the owners but for all participants and stakeholders (Timmons and Spinelli, 2004)
2.
Entrepreneurship is the process of creating something new of value by devoting the necessary time and effort, assuming the accompanying financial, psychic and social risks and receiving resulting results of monetary and personal satisfaction and independence (Hisrich and Peters, 2002)
ď‚— For the purpose of this course we will consider
entrepreneurship to involve innovation. ď‚— Despite the diversity of different definitions of
entrepreneurship that exist, there is general consensus that it involves a transformational process of market change undertaken by a particular manager , ď‚— Entrepreneurship can therefore be thought of as a societal
phenomenon (Davidson, 2003) or a process of change, comprising of the following behavioural components 1. The identification, evaluation and exploitation of an
opportunity 2. The management of the new or transformed organisation so 8
as to facilitate the production and consumption of new goods
The Entrepreneur, Entrepreneurial Firm, Entrepreneurial Management and the Owner Manager
ď‚— The Entrepreneur is the individual (or group of
individuals) who act(s) as principal mediator of the process of change through undertaking a specific project based on an opportunity that requires the implementation of a new idea or ideas. ď‚— The entrepreneurial firm is a particular type of 9
organisation which emerges as the result as the result of the
Entrepreneurship in Different Contexts
It should be noted that entrepreneurship is not confined to
the small profit making enterprise. Entrepreneurship takes place in a wide variety of contexts
including the public sector. The majority of small business owners do not innovate or
seek out change in a continuous or purposeful way in line with more recent definitions of entrepreneurship. Many small firms lack the creative spirit. The majority of
10
start-ups are based on established industries. There seems to be a tendency to play it safe, staying with the known business PSM523 and Publica new business. areasEntrepreneurship when considering Enterprise Management, Africa University,
Corporate Entrepreneurship: Intrapreneurship
Entrepreneurship can exist in large as well as small economic
units and in the public as well as private sector Small business does not have the monopoly of
entrepreneurial talent. The lack of policy and rules in a small, informal structure can
provide a more creative environment than a large hierarchical organization. Many large organizations however exhibit more sustained
11
entrepreneurial tendencies than small businesses. Some have deliberately tried to remain entrepreneurial by encouraging PSM523 Entrepreneurship and Public managers to innovate than to administer. Enterprise Management, Africa University,
Intrapreneurship or corporate entrepreneurship in
an existing organization structure has been encouraged by developments such as downsizing and delegation of power to smaller strategic business units (SBUs) Entrepreneurship within the larger firm can be related to
different objectives around the role of innovation. Stopford and Baden-Fuller (2008) , for example describe
corporate entrepreneurship under the following three headings: 1. Corporate Venturing which is the creation of a new
12
business within an existing organization i.e. the creation of new products or services or products either within the existing organizational boundaries or by investing outside. PSM523 Entrepreneurship and Public Enterprise Management, Africa University,
ď‚— This categorization is useful for indicating the difference
between innovation management (where usually the focus is on a particular product or process innovation) and entrepreneurial management, which is more about developing a dynamic capability for sustaining a flexible and responsive firm in a changing world. ď‚— Public Services have been through an era of upheaval in
how they are managed in many developed economies. The introduction of market forces and increased delegation of management responsibilities have been common themes in these changes , which tend to encourage entrepreneurial management behavior. ď‚— For example heads of units now have more control over 13
funds allocated or generated PSM523 Entrepreneurship and Publicby their unit and these funds are Enterprise Management, University, of customers they attract mainly dependent onAfrica the number
Exercise: Why Become An Entrepreneur
Why do you think people start their own business?
Write down a list of possible motives, indicating which you consider to be positive reasons and those you consider to be more negative Are some origins and backgrounds more likely to
produce entrepreneurs or induce self-employment than others? Give your responses to the possible factors below: Age- which age group most commonly enters self
employment or owner-management Gender- are men or women more likely to start a small 14
business. PSM523 Entrepreneurship and Public Enterprise Management, Africa University,
Types of Owner-Managers ď‚— Recent research has identified three types of owner-mangers
and entrepreneurs:
15
PSM523 Entrepreneurship and Public Enterprise Management, Africa University,
Types of entrepreneurial activities
16
1.
New Concept/ New Business
2.
Existing Concept/ New Business
3.
Existing Concept/ Existing Business
PSM523 Entrepreneurship and Public Enterprise Management, Africa University,
New Concept/ New Business The classic entrepreneur is one who develops a new product
or a new idea and builds a new business around the new concept. This requires a substantial amount of creativity and an ability
to see patterns and trends before they are evident to the general public. The business may be so new and revolutionary that it may
create an entirely new industry. Innovative business people are true entrepreneurs. 17
Examples are Steven Jobs, one of the founders of Apple PSM523 Entrepreneurship and Public Enterprise Management, AfricaGates University, Computer and Bill of Microsoft.
Existing Concept/ New Business ď‚— There are people who start new businesses based on old
concepts (a shop, food restaurant, a college). ď‚— The founder may not be described as innovative but the
business still represents a financial risk to the owner and the person is developing something where nothing previously existed
18
PSM523 Entrepreneurship and Public Enterprise Management, Africa University,
Existing Concept/ Existing Business ď‚— buys an existing business without many plans to change the
company operations
19
PSM523 Entrepreneurship and Public Enterprise Management, Africa University,
Motivating Factors For Entrepreneurs
One study on about 3000 entrepreneurs showed that
although many entrepreneurs are motivated by money, the need for achievement and a desire for independence are more important than money Most start businesses to avoid having a boss even though they
are self employed for less than they would receive if they worked for someone else Other cited motivations include: To use personal skills and abilities 20
To gain control over one’s life
PSM523 Entrepreneurship and Public Enterprise Management, Africa University,
Pull Influences 1.
Desire to exploit an opportunity: the identification of a perceived gap in the marketplace through personal observation and/or experience is a also a common reason for starting a new business. They may seek to exploit this opportunity through specialist knowledge, product development PSM523 Entrepreneurshipor andthey Publicmay hire the appropriate technology Enterprise andManagement, skills. Africa University, 2.
21
Desire for Independence: this features prominently in several research studies as the key motivator. A study of women entrepreneurs in Britain showed that women were motivated by the need for autonomy which had been frustrated by the individual’s prior training and background.
3.
Turning a hobby or previous work experience into a business: many new entrepreneurs seek fulfillment by spending more time involved in a cherished hobby or part of their work they particularly enjoy.
•
Although research confirms that founders tend to establish businesses in activities of which they have direct prior experience, this is often caused by push factors such as redundancy.
4.
Financial incentive: the rewards of succeeding in your own business can be high and are well-publicized by those selling “how to succeed” guides to would-be entrepreneurs. The promise of long-term financial independence can clearly be a motive in starting a new firm . Entrepreneurship and Public PSM523
22
Enterprise Management, Africa University,
Push Influences ď‚— Many people are pushed into founding a new enterprise by a
variety of factors, including: 1. Redundancy: this has proved a considerable push into
entrepreneurship particularly when accompanied by a generous handshake in a locality where other employment possibilities are low. 2. Unemployment (or threat of): job insecurity and
unemployment varies in significance by region and by prevailing economic climate. 3. Disagreement with previous employer: uncomfortable 23
PSM523 Entrepreneurship Public relations at workandhas also pushed Enterprise Management, Africa University,
new entrants into small
Necessity and Opportunity –Based Entrepreneurship
In some researches, pull and push influences are discussed in
terms of necessity-based and opportunity –based entrepreneurship. The necessity-based entrepreneur has little choice but
start their own business , given the lack of alternative possibilities for employment. Therefore, one may expect to find higher levels of such entrepreneurship in in poorer, less developed countries where job opportunities may be few and far in between. The opportunity-based entrepreneur is characterized as one 24
that seeks out a new opportunity in more pro-active manner.
PSM523 Entrepreneurship and Public Enterprise Management, Africa University,
Entrepreneurial Spirit ď‚— Entrepreneurs identify and develop business enterprise
building opportunities. ď‚— Entrepreneurs are risk takers and they are people who
recognise well the strengths, weaknesses, opportunities and threats of a business/enterprise building opportunity.
25
PSM523 Entrepreneurship and Public Enterprise Management, Africa University,