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) EntrepreneurSmall Business owner Establishes and manages a business for principal purpose of profit and growth Characterized by innovative behaviour Will employ strategic management practices in the business Establishes and manages a business for principal purpose of furthering personal goals. Business primary source of income and consumes majority of one’s time and resources. Business perceived as extension of personality, 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 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 Process OrganizationEnvironment 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 Environment Venture capital availability Presence of experienced entrepreneurs Technically skilled workforce 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 Existing competitors Substitute Bargaining power buyers/suppliers 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 Process Locate a business opportunity Accumulate resources Market products and services Produce the product Build an organization Respond to govt and society Individuals Need for achievement Locus of control Risk taking propensity Job Satisfaction Previous work experience Entrepreneurial parents Age Education

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