New Venture Creation and Control Mechanism

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New Venture Creation and Control Mechanism

• Professor Alexander Settles
• asettles_at_hse.ru

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Introduction to the Course

• New Venture Creation
• Entrepreneurship / Research on Entrepreneurship
• Innovation
• Business Planning
• Finance
• Organization Theory and Entrepreneurship and
  Innovation

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Course Design

• Requirements
• Attendance, Participation and Readings
• Personality Assessment
• Innovation Journal
• Assessment of New Venture or Entrepreneurial
  Policy/Action (in Groups)
• Exam

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Entrepreneurship
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EntrepreneursChallenging the Unknown

• Entrepreneurs
• Recognize opportunities where others see chaos or
  confusion
• Are aggressive catalysts for change within the
  marketplace
• Challenge the unknown and continuously create the
  future

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Entrepreneurship A Mindset

• Entrepreneurship is more than the mere creation
  of business
• Seeking opportunities
• Taking risks beyond security
• Having the tenacity to push an idea through to
  reality
• Entrepreneurship is an integrated concept that
  permeates an individuals business in an
  innovative manner.

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The Evolution of Entrepreneurship

• Entrepreneur is derived from the French
  entreprendre, meaning to undertake.
• The entrepreneur is one who undertakes to
  organize, manage, and assume the risks of a
  business.
• Although no single definition of entrepreneur
  exists and no one profile can represent todays
  entrepreneur, research is providing an
  increasingly sharper focus on the subject.

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A Summary Description of Entrepreneurship

• Entrepreneurship (Robert C. Ronstadt)
• The dynamic process of creating incremental
  wealth.
• This wealth is created by individuals who assume
  major risks in terms of equity, time, and/or
  career commitment of providing value for a
  product or service.
• The product or service itself may or may not be
  new or unique but the entrepreneur must somehow
  infuse value by securing and allocating the
  necessary skills and resources.

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An Integrated Definition

• Entrepreneurship
• A dynamic process of vision, change, and
  creation.
• Requires an application of energy and passion
  towards the creation and implementation of new
  ideas and creative solutions.
• Essential ingredients include
• The willingness to take calculated risksin terms
  of time, equity, or career.
• The ability to formulate an effective venture
  team the creative skill to marshal needed
  resources.
• The fundamental skills of building a solid
  business plan.
• The vision to recognize opportunity where others
  see chaos, contradiction, and confusion.

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An Integrative Model of Entrepreneurial Inputs
and Outcomes
Source Michael H. Morris, P. Lewis, and Donald
L. Sexton, Reconceptualizing Entrepreneurship
An Input-Output Perspective, SAM Advanced
Management Journal 59, no.1 (Winter 1994) 2131.
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Entrepreneurs in the United States

• Reasons for the exceptional entrepreneurial
  activity in the U.S. include
• A national culture that supports risk taking and
  seeking opportunities.
• Americans alertness to unexploited economic
  opportunity and a low fear of failure.
• U.S. leadership in entrepreneurship education at
  both the undergraduate and graduate level.
• A high percentage of individuals with
  professional, technological or business degrees
  who are likely to become entrepreneurs.

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Entrepreneurial Firms Impact

• Entrepreneurial components of the U.S. Economy
• Large firms have increased profitability by
  returning to their core competencies through
  restructuring and downsizing.
• New entrepreneurial companies have been
  blossoming in new technologies and new markets.
• Thousands of smaller firms established by women,
  minorities, and immigrants have strengthened the
  economy.

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Entrepreneurial Firms Impact

• Entrepreneurial firms make two indispensable
  contributions to an economy
• They are an integral part of the renewal process
  that pervades and defines market economies.
• They are the essential mechanism by which
  millions enter the economic and social mainstream
  of society.

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Aspects of Entrepreneurship
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Common Characteristics of Entrepreneurs

• Commitment, determination, and perseverance
• Drive to achieve
• Opportunity orientation
• Initiative and responsibility
• Persistent problem solving
• Seeking feedback
• Internal locus of control
• Tolerance for ambiguity

• Calculated risk taking
• Tolerance for failure
• High energy level
• Creativity and Innovativeness
• Vision
• Self-confidence and optimism
• Independence
• Team building

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Outline of the Entrepreneurial Organization
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Entrepreneurship Theory

• Entrepreneurs cause entrepreneurship.
• Entrepreneurship is a function of the
  entrepreneur
• Entrepreneurship is the interaction of skills
  related to inner control, planning and goal
  setting, risk taking, innovation, reality
  perception, use of feedback, decision making,
  human relations, and independence.

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Typology of Entrepreneurial Styles
Source Thomas Monroy and Robert Folger, A
Typology of Entrepreneurial Styles Beyond
Economic Rationality, Journal of Private
Enterprise IX(2) (1993) 71.
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The Dark Side of Entrepreneurship

• The Entrepreneurs Confrontation with Risk
• Financial risk versus profit (return) motive
  varies in entrepreneurs desire for wealth.
• Career riskloss of employment security
• Family and social riskcompeting commitments of
  work and family
• Psychic riskpsychological impact of failure on
  the well-being of entrepreneurs

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A Model of Entrepreneurial Motivation
Source Douglas W. Naffziger, Jeffrey S. Hornsby,
and Donald F. Kuratko, A Proposed Research Model
of Entrepreneurial Motivation, Entrepreneurship
Theory and Practice (spring 1994) 33.
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Opportunity Identification The Search for New
Ideas

• Opportunity identification is central to
  entrepreneurship and involves
• The creative pursuit of ideas
• The innovation process
• The first step for any entrepreneur is the
  identification of a good idea.
• The search for good ideas is never easy.
• Opportunity recognition can lead to both personal
  and societal wealth.

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Entrepreneurial Imagination and Creativity

• How entrepreneurs do what they do
• Creative thinking systematic analysis success
• Seek out unique opportunities to fill needs and
  wants
• Turn problems into opportunities
• Recognize that problems are to solutions what
  demand is to supply

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The Role of Creative Thinking

• Creativity
• The generation of ideas that result in the
  improved efficiency or effectiveness of a system.
• Two important aspects of creativity exist
• Process
• The process is goal oriented it is designed to
  attain a solution to a problem.
• People
• The resources that determine the solution.

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The Critical Thinking Process
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The Creative Climate

• Characteristics of a creative climate
• A trustful management that does not overcontrol
  the personnel
• Open channels of communication among all business
  members
• Considerable contact and communication with
  outsiders
• A large variety of personality types
• A willingness to accept change
• An enjoyment in experimenting with new ideas
• Little fear of negative consequences for making a
  mistake
• The selection and promotion of employees on the
  basis of merit
• The use of techniques that encourage ideas,
  including suggestion systems and brainstorming
• Sufficient financial, managerial, human, and time
  resources for accomplishing goals

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Country Level Competitiveness
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Innovation Rankings INSEAD 2009

• 1. United States
• 2. Germany
• 3. Sweden
• 4. United Kingdom
• 5. Singapore

• 6. South Korea
• 7. Switzerland
• 8. Denmark
• 9. Japan
• 10. Netherlands

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Russias Innovation Capacity

• 64. Vietnam
• 65. Trinidad and Tobago
• 66.Mauritius
• 67. Panama
• 68. Russia
• 69. Romania
• 70. Nigeria

• 29. Estonia
• 42. Lithuania
• 57. Azerbaijan
• 59. Uzbekistan
• 60. Latvia
• 72. Kazakhstan
• 79. Ukraine
• 98. Georgia
• 104. Armenia
• 112. Tajikistan
• 116. Moldova
• 122. Kyrgyzstan

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Russia Components

• Legacy of innovation - 49
• Culture to innovate - 46
• Quality of the educational system - 41
• Quality of management schools 66
• Intellectual property protection 93
• Technological awareness - 91
• Firm level technology absorption - 90

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United States

• Human Capacity 1
• Culture to innovate - 2
• Quality of the educational system 3
• Quality of management schools - 10

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Innovation and the Entrepreneur

• Innovation
• Is the process by which entrepreneurs convert
  opportunities into marketable ideas.
• Is a combination of the vision to create a good
  idea and the perseverance and dedication to
  remain with the concept through implementation.
• Is a key function in the entrepreneurial process.
• Is the specific function of entrepreneurship.

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The Innovation Process

• Types of Innovation
• Invention
• Extension
• Duplication
• Synthesis

• Sources of Innovation
• Unexpected occurrences
• Incongruities
• Process needs
• Industry and market changes
• Demographic changes
• Perceptual changes
• Knowledge-based concepts

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Major Innovation Myths

• Myth 1 Innovation is planned and predictable
• Myth 2 Technical specifications should be
  thoroughly prepared
• Myth 3 Creativity relies on dreams and blue- sky
  ideas
• Myth 4 Big projects will develop
  better innovations than smaller ones
• Myth 5 Technology is the driving force of
  innovation success