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-A number of concepts have been derived from the idea of entrepreneur: entrepreneurial,entrepreneurship, and entrepreneurial process. The idea that an entrepreneur undertakes certainprojects offers an understanding to the nature of entrepreneurship
-entrepreneurial is an adjective that describes how the entrepreneur undertakes whatthey do
-entrepreneurship is what the entrepreneur does-entrepreneurial process in which the entrepreneur engages is the means through whichnew value is created as a result of the project: the entrepreneurial venture-effective entrepreneurs work to reward all the stakeholders in their ventures, not just investors-innovation has been a critical characteristic and some entrepreneurs seek profit-limitingsocial responsibilities.
-The entrepreneur can be considered as:
-a manager undertaking an activity-- in terms of the particular tasks they perform
-an agent of economic change --in terms of the effects they have on economic systemsand the changes they drive
-an individual -- in terms of their psychology, personality and personal characteristics
The entrepreneurs tasks
--Owning Organizations: many entrepreneurs do own their own companies but ownership lies withthose who invest. If an entrepreneur actually owns the business then he or she is an investor anda manager.
--Founding New Organizations: the entrepreneur is the person who undertakes the task of briningtogether different elements of the organization and giving them separate legal identity.
--Bringing Innovations to Market: the entrepreneur goes beyond just inventing something new,but also bringing that innovation to the marketplace and giving value to customers---Identification of market opportunity: entrepreneur must identify opportunities and pursue themwith suitable innovation
--Application of Expertise: they have special ability in deciding how to allocate scarce resources insituations where info is limited. They have skill.--Provision of leadership: Leadership is essential in being an entrepreneur
--Entrepreneur as a manager: entrepreneur takes on no task that is different from tasks byordinary managers at some time or another. Entrepreneur is a manager.
The role of the entrepreneur
-Efficient means that resources are distributed in an optimal way that is the satisfaction thatpeople can gain from is maximized.
-Lack of knowledge in the future is call uncertainty. If we know the likelihood of variouspossibilities then uncertainty becomes risk. There is a market for risk. People want to avoid riskand are willing to pay to have it taken away. Entrepreneurs can take risk off peoples hands andare willing to buy it.-To an economist, risk results from making an investment. Risk is the probability that the returnfrom an investment may be less than expected
-Some say primary role of entrepreneurs is one of maximizing returns that shareholders get fromtheir investments.
-Entrepreneurs are also info seekers and process market information.
economic effects of entrepreneurial activity
-economists recognize 3 economic factors:
- raw materials,
All products andservices are combinations of these.
The entrepreneur as a person
An understanding of how different views of the nature of an individualpersonality have been introduced into definitions of and understanding of the entrepreneur.
- ‘Great person’ notion that entrepreneurs can be destined for greatness just as importantscientists or artists. It is not very useful however.
- Social Misfit notion that entrepreneurs are misfits at heart.-- they are unable to fit into existingsocial situations.- Personality Type- entrepreneurs can have different personality types to determine how they actin different situations
- Personality Trait-- While a personality may be of a particular type, it has a trait.
-Ability trait-- relate to specific ability of problem solving, planning innovativeness ornegotiation skills.-Temperamental traits- those concerned with public actions (introversion vs extroversion)-Dynamic traits- those concerned with internal motivation
-Social Development approaches-- the way people behave is not predetermined. An entrepreneuris not born, they are made. Factors leading to social development: Innate, Acquired, and Social.
-Cognitive Approaches-- attempts to develop an understanding of how humans obtain info and useit.
Entrepreneurship: a style of management
a recognition that entrepreneurship is a style of management aimed atpursuing opportunity and driving change
- --Entrepreneurial management may be distinguished from conventional management by:
- -a focus on change rather than continuity
- -a focus on new opportunities rather than resource conservation
- -organization-wide rather than specific-function management
-Entrepreneurs are manager who are willing to venture: to create change and to pursueopportunity rather than maintain status quo and conserve resources.
The human dimension: leadership, power, and motivation
-Leadership, power, and motivation are interrelated and interdependent tools which theentrepreneur can use to control the venture and give it direction
-Leadership is the power to focus and direct the organization. Entrepreneurial leadership is basedon the communication of vision.
-Power is the ability to influence the course of actions within the organization. Power is based onthe control of resources and the symbolic dimensions of the organization, particularly the visionwhich drives it-Motivation is the ability to encourage an individual to take a particular course of action. Motivationis based upon an understanding of drives and the ability to reward effort.
Who becomes an entrepreneur?
-The inventor is someone who has developed an innovation and who has decided to make acareer out of presenting that innovation to the market.
-A wide variety of people can become entrepreneurs. Common backgrounds include inventors withnew business ideas; managers unfulfilled by working in established organizations; displacedmanagers; young professionals; and people excluded from the established economy.
Characteristics of the successful entrepreneur.
-Whatever their background, successful entrepreneurs are characterized by being hardworking orself-starting; setting high personal goals; having resilience and confidence in their abilities; beingreceptive to new ideas and being assertive in presenting them; being attuned to newopportunities, receptive to change and eager to learn; and being confident with power anddemonstrating a commitment to others.
-They also must be comfortable with power.
-Important management skills include:
-strategy skills: consider business as a whole and how it fits in marketplace
-planning skills: considering what future might offer
-marketing skills: ability to see past firm’s offerings-financial skills: ability to manage money-project management skills: ability to organize projects, to set objectives and schedules
-Time manage skills: ability to use time productively-Leadership skills: ability to inspire people to work in a specific way and undertake tasks
-Motivation skills: ability to enthuse people and get them motivated
-Delegations skills: ability to allocate tasks to different people
-Communication skills: ability to use spoken and written language to express ideas-Negotiation skills: ability to understand what is wanted from a situation
-Effective entrepreneurs use a variety of formal management skills combined with industryknowledge and personal motivation
-The way entrepreneurs manage their ventures is dependent on the culture in which they operate.
Effective entrepreneurs are sensitive to cultural values
The supply of entrepreneurs, forces which encourages entrepreneurship
-The supply of entrepreneurs is determined by 3 factors
- -The supply of entrepreneurs is determined by 3 factors:
- pull factors which promoteentrepreneurship as a positive option;
- push factors which drive people out of the establishedeconomy; and
- inhibitors which prevent the entrepreneurial option’s being taken up.
-Some important pull factors include: financial rewards of entrepreneurship; freedom to work foroneself; sense of achievement; freedom to pursue a personal innovation
-Some important push factors include: limitations of financial rewards from conventional jobs; jobsecurity; being unemployed in the established economy-Some important inhibitors include: an inability to secure start-up capital; high cost of start-upcapital; legal restrictions; lack of training
Influences on the move to entrepreneurship
-Managers make the move to entrepreneurship after considering the way the option for anentrepreneurial career can satisfy economic, social, and self-development needs
-Economic needs: include the requirement to earn a particular amount of money and the need forthat income to be stable and predictable
-Social needs: these represent the desire a person has to be part of, and to fit into, a wider groupand their desire to be recognized and respected
-Developmental needs: relate to the desire a person has to achieve personal goals and to grow.
-Valence- the way we are attracted to different options
The initiation decision, the factors that influence the decision to initiate a venture and howthese factors might be modeled.-The initiation decision has come
-The initiation decision has come under continued scrutiny and is being explored from economic,social psychological, and cognitive psychology perspectives. A number of models have beenproposed.
The initiation process
-The pre-initiation phase is one that demands a number of activities on the part of theentrepreneur. Consistencies in the pattern of these activities across different types of entrepreneurare the subject of a growing number of studies. The extent of activity does seem to be correlatedwith the level of initial investment the venture requires
-Entrepreneurial Success can be understood in 4 interacting aspects:
-performance of the venture
-the people who have expectations from the venture
-the nature of those expectations
-actual outcomes relative to expectations
The success of the entrepreneurial venture must be understood through 3 dimensions:
- the stakeholders who have an interest in the venture;
-stakeholder expectations of the venture; and
-actualoutcomes relative to those expectations
personal goals manifest at 3 levels:
economic (monetary rewards);
social (fulfilling relationshipswith others);
self-developmental (the achievement of personal satisfaction)
-The most effective entrepreneurs define objectives for success in relation to all the venture’sstakeholders (not just the investors) and operate with a keen sense of social responsibility
the main factors involved in the success of a new venture
-Many successful entrepreneurs have demanded that their businesses operate with a higher levelof social responsibility than other businesses operating in their sectors
-Success factors: The venture exploits a significant opportunity; The opportunity the venture aimsto exploit is well defined; The innovation on which the venture is based is valuable; The entrepreneur brings the right skills to the venture; The business has the right people; Theorganization has a learning culture and its people a positive attitude; Effective use of the network;Financial resources are available; The venture has clear goals and its expectations are understood.
The criteria used to set objectives for the entrepreneurial venture andto monitor its performance
-Performance venture is subject to a variety of measures including:
- absolute financialperformance,
- financial performance ratios,
- financial liquidity ratios,
- absolute stock marketperformance,
- stock market ratios,
- market presence,
- customer assesment
How entrepreneurial success impacts on social responsibility.
-The issue of corporate social responsibility is complex and of growing interest. There is no clearpicture as to whether, in general, accepting higher levels of responsibility increases or decreasesshareholder value.
-Values are the core set of beliefs and principles deemed to be desirable by a group
-Ethics are the conception of which actions are right or wrong, what people should seek or avoid.
-Business ethics are these, but related to business
-Corporate social responsibility is the categories of economic, legal, ethical and discretionaryactivities of a business entity adapted to the values and expectations of a wider society
Social responsibility and business performance
In many ways, different types of entrepreneurship (social versus conventional) might be seen asdifferent prioritization’s of stakeholders within a general entrepreneurship framework
What business failure actually means
-Failure has many degrees and is an integral part of venturing. Good entrepreneurs learn fromfailure.-Degrees of failure:
1. The business continues to exist as a legal entity under the control of the entrepreneur
a. the business performs well financially but does not meet the social and selfdevelopment needs of the entrepreneur
b. the business fails to achieve set strategic objectives
c. the business fails to perform as well as planned but is financially secure
d. the business fails to perform as well as planned and needs more financial support
2. The business continues to exist as an independent entity but the entrepreneur loses control
a. the business is taken over as a going concern by new management
b. the business is taken over with restructuring
3. The business does not continue to exist as an independent entity
a. the business is taken over as a going concern and absorbed into another company
b. the business is broken up and its assets disposed of