Lecture One of Entrepreneurial Society

What Is Entrepreneurship

"An activity that involves discovery, evaluation and exploitation of opportunities to introduce new goods and services, and organize new markets, process and raw materials through coordinating efforts of the entrepreneur that previously did not exist" - Shane

What Is Entrepreneurship

"Entrepreneurship is an economic phenomenon involving a news of two phenomena" the presence of lucrative opportunities and the presence of enterprising individuals" - Shane and Venkataraman

What is Entrepreneurship

"The creation of a new economic entity centred on a novel product or service or, at the very least, one which differs significantly from products or services offered elsewhere in the market" - Deakins and Freel

Key Characteristics of Personality Approach

- Achievement - Calculated risk-taker - High internal locus of control - Creativity - Innovative - need for authority - ambiguity tolerance - vision - self-efficacy

Entrepreneurs who increase cognitive adaptability have an improved ability to:

- Adapt to new situations - Be creative - Communicate one's reasoning behind a particular response.

Shortcomings of Personality Approach

- Characteristics may change over time - Subjective (rather than objective) Judgements, personal traits on our end - Ignorance to Culture, Education, and Training --> leads to destruction when you don't let kids to speak compared to western cultures - Social stratification is ignored: Social Status, Class and Caste. etc. upper and middle class which is problematic

The 5 core traits of Entrepreneurship

- Confidence - Risk-taking - Flexibility - Achievement Orientation - Independence

Precursors or Key Factors for Entrepreneurship

- Culture (See them all over the world, culture in USA supports entrepreneurship) - Social Group - Education - Employment

Cognitive Adaptability describes the extent to which entrepreneurs are

- Dynamic - Flexible - Self0regulating - engaged in the process of generating multiple decision frameworks focuses on sensing and processing changes in their environments and then acting on them

Entrepreneurs need to sometimes:

- Effectuate - Be cognitive adaptable - Learn from a

Loss of a business can interfere with:

- Entrepreneurs ability to learn from the failure - Motivation to try again

Myths of Entrepreneurs

- Entrepreneurs are doers not thinkers - Entrepreneurs are born, not made - Entrepreneurs are always inventors - Entrepreneurs are academic and social misfits - Entrepreneurs must fit the profile - All entrepreneurs need is money - Entrepreneurs are unstructured and chaotic - Most Entrepreneurial Entrepreneurial Initiatives Fail - Entrepreneurs are extreme risk takers

How Entrepreneurs Think

- Entrepreneurs in particular situations may think differently when faced with a different task or decision environment.

Pull Factor of Entrepreneurship

- Independence - Being one's own boss - Using creative skills - Doing enjoyable work - Making a lot of money (You need independence and to be your own, may be making your own money but you don't like being bossed around by a manager and you want to contribute and use your creative skills

Being an Entrepreneur Today:

- Involes Creation process - Requires deviation of time and effort - involves rewards of being an entrepreneur - Requires assumption of necessary risks

The Practical Implications of the Dual Process:

- Knowledge the feelings and reactions being experienced are normal. - Realizing that psychological and physiological outcomes by the feelings of loss are "symptoms" can reduce secondary sources of stress. - There is a process of recovery to learn from failure, which offers some comfort that current feelings of loss will eventually diminish - Recovery and learning process can be enhanced by some degree of oscillation - Recovery from loss offers an opportunity to increase one's knowledge of entrepreneurship

Two Processes of Recovery

- Loss-Orientation - Restoration-Orientation

Extrenpreneur's motivation is not simply from personal profit but from:

- Loyalty to a product - Loyalty to a market and customers - Personal growth - The need to prove oneself

McClelland's Personality Approach

- Need for Achievement - Proactive person: lots of initiative and assertive - Committed to aims and achieving them

A blend of Economic and Personality Approach Traits

- Opportunistic - Innovative - Risk-Taker under Uncertainty

Hisrich's Three Types of Entrepreneurship (Innovation)

- Ordinary - Technological - Breakthrough

Personal values tend to be influenced by:

- Peer Pressure - General social norms in the community - Pressures from their competitors

Role of Entrepreneurship in Economic Development

- Product-evolution process - Iterative Synthesis

Baumol's Three Types of Entrepreneurship

- Productive - Unproductive - Destructive

Push Factor of Entrepreneurship

- Redundancy - Unemployment - Frustration with previous job - Need to earn a reasonable living - Support family (Not necessarily the initiator of this venture, pushed or forced to for unemployment

Economic Approach: Schumpter

- Someone who is concerned with the cost benefit analysis and making profits - The entrepreneur is a special person - Entrepreneur is an innovator - Develops new technology - Economic growth is driven by entrepreneurship

Causal process

- Starts with a desired outcome - Focuses on the means to generate that outcome

Effectuation Process

- Starts with what one has (who they are, what they know, and whom they know) - Selects among possible outcomes. - Thinking about your resources, such as financial, physical, capital, human capital skills.

Reasons for the Recent Growth in Entrepreneurship

- Structural shift from manufacturing (large firm dominated) to services (small firm dominated) - Growth in personal, flexible, tailor-made services - Restructuring by large firms - focus on core activities, sub-contract non-core activities - Technological change - Low cost and access to communications technology - importance of human capital rather than financial capital as the basis for competitiveness Consumer choice - Deregulation of markets - availability of finance - Availability of support

Economic Approach: Knight

- The entrepreneur is an individual who is prepared to undertake risk and the reward - profit - is the return for bearing uncertainty (for uninsurable risk) - Entrepreneur is calculated risk taker - opportunity for profit arises out of uncertainty (an uninsurable risk) - Opportunity for profit arises out of uncertainty surrounding change - Responsibility for one's own actions/calculated risk

Learning from Business Failure

- Uncertainty, changing conditions, and insufficient experience can contribute to failure among entrepreneurial firms. Loss of a business can result in a negative emotional response from the entrepreneur.

Why is Entrepreneurship Important?

1. Entrepreneurs play an important role in the change of technology 2. Entrepreneurs create and additional sense of competition whilst also, providing a mechanism for regeneration 3. Entrepreneurs contribute to international competition via niche markets 4. Entrepreneurs influence in creating jobs

Risk-Taker under Uncertainty

A regular income is a requirement in any job and the cause of much upheaval and stress. People tend to be risk adverse and less willing to be risky with their own money. In this manner managers and entrepreneurs are very different.

Personality Approach: Need for Achievement

Achievement doesn't necessarily mean that money is an end itself. It may allude to employing the 100th person, meeting the first million-pound mark, etc.

Market size

Can create new markets. What is in it for me? What is the payoff I am going to get. Payoff can be revenues, market share, brand recognition, etc. How much will this cost me and calculate all the costs associated with this new venture.

Personality Approach: Need For Independence

Controlling your own destiny, doing things differently, being in a situation where you can fulfil your potential

Destructive Entrepreneurship

Destructive Entrepreneurship benefits the individual at the expense of society. Illegal

Two Approaches To Entrepreneurship?

Economic and Personality Approach

Recovery and Learning Process

Emotional recovery from failure happens when thoughts about the events surrounding, and leading up to the loss of the business, no longer generate a negative emotional response.

Situational Factors

Employment and Unemployment: Push Factor Immigration and Economic opportunity: Pull Factor

Economic Approach: Kirzner

Entrepreneur is alert to profitable opportunities for exchange - Identifies suppliers and customers and acts as an intermediary (no necessity to own resources and profit Aries from intermediary function) - Entrepreneur has additional knowledge which is not possessed by others (the role of information is very important) - Anyone could potentially possess the additional knowledge and be alert to opportunities for exchange and trade.

Opportunistic

Entrepreneurs exploit change for profits. They seek out opportunities to make money

What Is Entrepreneurship: Timmons

Entrepreneurship is a way of thinking, reasoning and acting that is opportunity obsessed, holistic in approach, and leadership balanced.

What Is Entrepreneurship (Drucker)

Entrepreneurship is an act of innovation that involves endowing existing resources with new wealth-producing capacity

What Is Entrepreneurship: Low and Macmillan

Entrepreneurship is the creation of new enterprises.

What Is Entrepreneurship (Stevenson et al.)

Entrepreneurship is the pursuit of an opportunity without concern for current resources or capabilities.

What Is Entrepreneurship (Venkataraman)

Entrepreneurship research seeks to understand how opportunities to bring into existence future goods and services are discovered, created and exploited by and whom, and with what consequences.

Social Groups

Family: What type of family do you belong to Ethnicity: In terms of caste system - Gender - Religion

Ordinary Entrepreneurship

New products with little technological change ex. in terms of smartphones --> GPS in phones

Technological Entrepreneurship

New products with significant technological advancement.

Breakthrough Entrepreneurship

New products with some (substantial) technological change

The Entrepreneurial Process

Opportunity Identification Market size and length of the window Window of Opportunity

Product-Evolution Process

Process through which innovation is developed and commercialized

Productive Entrepreneurship

Productive Entrepreneurship is innovation leading to wealth creation and economic development which advances not only the individual but wider society. Pursue a business opportunity within prevailing. Benefits the group of individuals and society as a whole ex: Microsoft, AirBnB --> contributes to Economy.

Innovative

The ability to spot opportunities to innovate are the most important distinguishing features of an entrepreneur. Innovation is the prime tool entrepreneurs use to create or exploit opportunity.

A Dual Process for learning from failure

The dual process of oscillating between the loss-orientation and restoration-orientation enables a person to: - Obtain the benefits of each - Minimize the costs of maintaining one for too long. The dual process spends the recovery process.

Iterative Synthesis

The intersection of knowledge and social need that starts the product development process

Opportunity Identification

The process by which an entrepreneur comes up with the opportunity for a new venture. The first step is that an idea comes to your mind.

Business Ethics

The study of behaviour and morals in a business situation

Entrepreneurs Are Revolutionaries

Think about all the ways entrepreneurs have affected or changed your life and your perspective.

Window of Opportunity

This time period available for creating a new opportunity

How many Entrepreneurial Iniative's end in failure?

Two Thirds (2/3)

Unproductive Entrepreneurship

Unproductive Entrepreneurship is some form of bureaucracy that typically benefits an individual but not necessarily society. Create contracts to overcome institutional shortcomings ex. lobbying, help other avoid. Profit maximization. Example: Lawyer.