Enterprise and Entrepreneurship

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Enterprise and Entrepreneurship
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Enterprise and Entrepreneurship

• Aim To introduce the concepts of enterprise
  and entrepreneurship, including their
  interrelationships, and to examine the most
  relevant factors of influence on them.

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Once upon a time

• agriculture main source of employment
• Industrial Revolution
• Wall Street Crash 1929
• Job creation schemes relatively successful in UK
• Second World War and after full employment
• 1970s and 80s dramatic increase in unemployment
• Changes in industry increasing output through
  increased productivity NOT through additional
  employment.

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Once upon a time (cont.)

• David Birch The Job Generation Process (1979)
• study of employment situation in USA
• Small firms (lt100 employees) created 80 of net
  new jobs in early 70s USA.
• Findings dismissed by many
• Seminal study
• Replicated by others
• Put spotlight on small business development
• Led to increasing support for small business
  sector

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Once upon a time (cont.)

• Charles Handy, The Future of Work (1984)
• Changes in expectations of normal working life
• In many countries services were beginning to
  overtake manufacturing in their contribution to
  GDP.
• Long-term employment replaced by more flexible
  employment practices
• Also
• ICT
• Knowledge important rather than physical effort
• Location less relevant

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• What has all this got to do with enterprise?

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• Trend to contract out tasks rather than employ
  people
• ? people will have to be more proactive in
  securing an adequate income
• ? an increasing number of people will be offering
  their skills, either alone or in small units
• ? Less dependence on government

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• In what context have you come across or used the
  term enterprise?

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Definition of Enterprise

• Two definitions (OECD)
• One which can be termed a narrow one, regards
  enterprise as business entrepreneurialism, and
  sees its promotion and development within
  education and training systems as an issue of
  curriculum development which enables young people
  to learn, usually on an experiential basis, about
  business start-up and management.
• The second approach, which can be termed the
  broad one, regards enterprise as a group of
  qualities and competencies that enable
  individuals, organisations, communities,
  societies and cultures to be flexible, creative,
  and adaptable in the face of, and as contributors
  to, rapid social and economic change.

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The narrow view of enterprise

• Richard Chantillon coined the term
  Entrepreneur in 1734 (entreprendre to
  undertake).
• Joseph Schumpeter saw innovation as fundamental
  to the entrepreneurial process of wealth creation
  (1928)
• challenged classical economics
• saw entrepreneurs as self-interested individuals
  who established short-term monopolies through
  innovation.
• creative destruction innovation by new
  generation of entrepreneurs, creating new demand.
• further development of Kondratieffs long waves

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The narrow view of enterprise (cont.)

• Which of these waves do you think you can
  identify?

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The narrow view of enterprise (cont.)

• Kondratieffs long waves (1925)
• 1770s/80s Textiles
• 1830/40s Steam engine iron and steel
• 1880s/90s Electrical engineering
• 1930s/40s Cars, petrochemicals
• 1980s/90s Computing, information services

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The narrow view of enterprise (cont.)

• Schumpeters view of innovation
• Introducing a new good
• Utilising a new process
• Penetrating a new market
• Identifying new sources of supply of raw
  materials.
• Creating new types of industrial organisation.

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The narrow view of enterprise (cont.)

• Peter Drucker
• Like Schumpeter, sees innovation as central to
  entrepreneurial activity.
• Sees innovation as a discipline capable of being
  learned and capable of being practised.
• Identifies seven sources of opportunity for firms
  in search of innovation 4 internal to the
  firm/industry, 3 external.

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The narrow view of enterprise (cont.)

• Internal opportunities
• The unexpected success/failure/event
• The incongruity between what was supposed to
  happen and what actually happened.
• The inadequacy in underlying processes taken for
  granted but relatively easy to improve.
• The changes in industry/market structure often
  unexpected .

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The narrow view of enterprise (cont.)

• External opportunities
• Demographic changes changes in birth rates, life
  expectancy, medical breakthroughs etc.
• Changes in perception, mood and meaning economic
  cycles, fashion fads, cultural changes.
• New knowledge scientific and general.

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The narrow view of enterprise (cont.)

• Central role of entrepreneur/entrepreneurship in
  business/economic activities accepted.
• Definitions of entrepreneur(ship) vary widely
• In the context of economic development
  enterprise and entrepreneurship are often used
  synonymously.

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The broad view of enterprise

• Enterprise in individuals
• Entrepreneurial or enterprising characteristics
  can be defined
• in terms of behaviour
• as associated skills
• as personal attributes.
• (Gibb, 1993)

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Enterprise in individuals (cont.)

• Enterprising behaviours
• Acting independently on own initiative
• Actively seeking to achieve goals
• Flexibly responding to challenges
• Coping with and enjoying uncertainty
• Taking risky actions in uncertain environments
• Solving problems/conflicts creatively
• Opportunity seeking
• Commitment to make things happen
• Persuading others

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Enterprise in individuals (cont.)

• Associated skills
• Problem solving
• Creativity
• Persuasiveness
• Planning
• Negotiating
• Decision taking

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Enterprise in individuals (cont.)

• Personal attributes
• Self-confident
• Autonomous
• Achievement oriented
• Versatile
• Dynamic
• Resourceful
• (Gibb, 1993)

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Enterprise in individuals (cont.)

• Entrepreneurs display similar characteristics
• No agreement over what they are and how many
  exist
• Hornaday (1982) identifies more than 40
• Timmons et al. identifies 19
• Lessem suggests there are several types of
  entrepreneur, depending on their personality
  traits

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Enterprise in individuals (cont.)

• The main traits/characteristics of the
  entrepreneur are
• Need for achievement
• Risk taking
• Locus of control
• Desire for independence/autonomy
• Creativity
• Intuition

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Antecedent influences

• Difficult to prove relevance of antecedent
  influences due to large number of uncontrollable
  variables.
• Research results often contradictory
• Some influences appear to be more relevant for
  start-ups, others for growth businesses

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Antecedent influences (cont.)

• Family
• Positive influence if a parent is in business
• Employment/Unemployment
• Firms founded by unemployed individuals tend to
  grow more slowly than those whose founders were
  in employment.
• Education
• Positive association between educational
  attainment and starting-up a business and, even
  stronger, fast growth firms.
• Role of education and training in developing
  enterprise skills

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Entrepreneur vs small business owner

• Small business venture
• independently owned and operated
• not dominant in its field
• does not engage in any new marketing or
  innovative practices.

• Entrepreunerial venture
• engages in at least one of Schumpeters
  categories of behaviour.
• principal goals are profitability and growth
• characterised by innovative strategic practices

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Entrepreneur vs small business owner (cont.)

• Entrepreneur
• Establishes and manages a business for the
  principal purpose of profit and growth.
• Characterised by innovative behaviour
• Employs strategic management practices.
• (Carland et al., quoted in Beaver)

• Small business owner
• Establishes and manages a business for the
  principal purpose of furthering personal goals.
• Business must be the primary source of income.
• Owner perceives the business as an extension of
  his/her personality, intricately bound with
  family needs.

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Intrapreneurship

• the process in which innovative products or
  processes are developed by creating an
  entrepreneurial culture within an organisation.
• (Kirby)
• the term intrapreneur was invented to describe
  those individuals who operated as entrepreneurs
  within existing organisations.
• (Jones-Evans)

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Intrapreneurship (cont.)

• Intrapreneurs must have relevant managerial
  skills and
• entrepreneurial skills.
• Managerial skills
• Ability to adopt a multidisciplinary role
• Understanding the environment
• Encouragement of open discussion
• Creation of new options
• Building a coalition of supporters

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Intrapreneurship (cont.)

• Entrepreneurial skills
• Vision and flexibility
• Action orientation
• Dedication
• Persistence in overcoming failure
• Setting self-determined goals
• Jones-Evans

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International comparisons

• The USA is generally considered to be the role
  model for entrepreneurial culture.
• The most widely used dimensions of culture are
  (still) those developed by Hofstede (1981).

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Hofstede (cont.)

• Cultural differences are expressed in four
  dimensions
•  Power distance
• The extent to which the less powerful members of
  institutions and organisations within a country
  expect and accept that power is distributed
  unequally.

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Hofstede (cont.)

• Individualism vs. collectivism
•  Individualism
• Societies in which the ties between individuals
  are loose everyone is expected to look after
  himself or herself and his or her immediate
  family.
• Collectivism
• Societies in which people from birth onwards are
  integrated into strong, cohesive ingroups, which
  throughout peoples lifetime continue to protect
  them in exchange for unquestioning loyalty.

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Hofstede (cont.)

• Masculinity vs. femininity
•  Masculinity
• Societies in which social gender roles are
  clearly distinct.
• Femininity
• Societies in which gender roles overlap (i.e.
  both men and women are supposed to be modest,
  tender and concerned with the quality of life)

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Hofstede (cont.)

• Uncertainty avoidance
• the extent to which the members of a culture feel
  threatened by uncertain or unknown situations.
• Long-term Orientation (Confucian Dynamism)
• not part of the original study
• Confucian tradition emphasises long-term
  orientation thrift, perseverance

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• How would you relate these dimensions of culture
  to enterprise/entrepreneurialism?

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Hofstede (cont.)

• Position of USA in Hofstedes indices
•  Power distance bottom quartile
• Individualism No.1
• Masculinity top quartile
• Uncertainty avoidance bottom quartile

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Hofstede (cont.)

• PS
• Hofstedes data collected 1968-72
• Culture changes
• UKs cultural dimensions similar to USA.
• Level of entrepreneurship/enterprise?!?

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Summary

• Enterprise and Entrepreneurship
• The development of an enterprise culture
• The broad view of enterprise
• The narrow view of enterprise
• Enterprise in individuals
• External factors
• Intrapreneurship
• International comparisons

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Further Reading

• Gibb, A., 1993, The Enterprise Culture and
  Education, International Small Business Journal,
  Vol.11. No. 3, pp.11-34.

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• 1. Prepare for discussion in seminar
• Entrepreneurs are born and not made!
• 2. Module website
• http//www.busmgt.ulst.ac.uk/modules/bmg409c1/bmg4
  09c1.html
• 3. Notice-board outside L224.
• 4. E-mail me from an address which you check on a
  regular basis.