Dia 1

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First question
What do you define as Entrepreneurship? What is
your expectation of this module?
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Theories on Entrepreneurship
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"... most of our decisions to do something
positive, the full consequences of which will be
drawn out over many days to come, can only be
taken as a result of animal spirits - of a
spontaneous urge to action rather than inaction,
and not as the outcome of a weighted average of
quantitative benefits multiplied by quantitative
probabilities... if the animal spirits are dimmed
and the spontaneous optimism falters...
enterprise will fade and die"

• J.M Keynes The General Theory of Employment,
  Interest and Money.

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Entrepreneurship for young people

• The current and next generations are well suited
  for entrepreneurial activities.
• Youngsters of today
• Are immersed in technology and have internalized
  its power
• You are passionate and challenging you welcome
  change and embrace the idea of progress
• Young companies born on the right side of the
  digital divide, are running circles around their
  older, richer and slower rivals
• You are independent you are workers with little
  loyalty to companies making strategic mistakes

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Minipreneur eco system
www.trendwatching.com
Today's aspiring and established MINIPRENEURS
truly have a highly developed network of
intermediaries, tools, resources, and processes
at their disposal. It's an ecosystem on a much
more elaborate scale than anyone foresaw even
five years ago when entrepreneurialism was all
the rage during the .com boom. MINIPRENEURS have
access, for peanuts, if not for free, toA.
Hardware, software, ICT and skillsB. Design,
production and manufacturingC. Monetizing
existing assetsD. MarketplacesE. AdvertisingF.
Travel G. Talent, finance, payment, logistics
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Theories on Entrepreneurship

• Why do we need theories?
• How can we define Entrepreneurship?
• Resource-based theory
• Entrepreneurs born or made?

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Why do we need theories?

• Imagine we would have a law of Entrepreneurship
  just like Newtons law of gravity
• Everyone would know this law and experience
  unlimited success

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• would we be happy then knowing this law?
• If everyone could succeed,
• there would not be much profit in it!

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Why do we need theories?

• Theories on Entrepreneurship are not laws they
  do not explain precisely what will happen with
  absolute certainty in all cases risk
  uncertainty
• An entrepreneur with a good theory of how
  entrepreneurship works is practical and
  efficient.
• With a good theory we can think about all the
  problems and issues of new venture creation
  without having to start business after business
  to see what works and what does not.

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Why do we need theories?

• So, lets be glad we have theories on
  Entrepreneurship, not laws!

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Definitions of Entrepreneurship

• Entrepreneurship is the creation of an innovative
  economic organization for the purpose of gain or
  growth under conditions of risk and uncertainty.

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• How innovative can an organization be?
• New product or service offered
• New method or technology employed
• New market targeted and opened
• New source of supply of raw materials and
  resources used
• New form of industrial organization created
• Innovation is not creating new things, but doing
  new things with existing ones.

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Drivers of Entrepreneurship

• Risk variability of outcomes/returns
• Uncertainty the environment cannot be perfectly
  known to the entrepreneur

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Resource based theory

• The resource-based theory
• Helps us to understand new venture creation
• Describes how entrepreneurs can build businesses
  using their own resources and capabilities/compete
  nces

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Resource based theory

• The resource-based theory says that an
  entrepreneur uses resources that are
• Rare
• Valuable
• Hard to copy
• Non-substitutable for a sustainable competitive
  advantage
• But the choice of which industry to enter and
  what business to be in, is not enough to ensure
  success. The nature and quality of the above
  resources, capabilities and strategies the
  entrepreneur possesses can lead to long-term
  success.

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The RB theory helps to explain 2 common
paradoxes

• Paradox 1
• What is known to all, is an advantage to none!
• You can get smarter without getting richer if the
  knowledge you posses isnt rare, valuable, hard
  to copy or hard to substitute.
• Intelligence alone does not always lead to
  success in business.

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The RB theory helps to explain 2 common
paradoxes
You wouldnt want to belong to any club that
would have you as a member!

• Paradox 2
• Creating success in industries with large
  barriers. It seems existing firms have the edge,
  but certain individuals can create business.
• E.g. Richard Branson, Michael OLeary, Anita
  Roddick,

Because if you get in, everyone could.
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3 dimensions to study entrepreneurship

• Individuals personal experience, knowledge,
  education, training contributing to the
  enterprise. But individuals rely on a network of
  other people, other businesspeople and other
  entrepreneurs.
• Environments opportunities (resources) and
  threats (competition). Combine resources and
  configure these into success.
• Organizations have a form structure. Strategy
  enables to create or penetrate a market. It is
  made up of people who have skills, talents,
  values and beliefs.

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Sam Waltons 10 rules to follow
Founder of Walmart USA

• Commit to your business and believe in it
• Share your profits with your partners (employees)
• Motivate your partners, challenge them and keep
  score
• Communicate everything
• Appreciate your associates with well-chosen words
• Celebrate your success
• Listen to everyone and get them talking
• Exceed your customers expectations
• Control your expenses
• BREAK ALL THE RULES. Swim upstream. Go the other
  way.

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Resource-based theory

• What is a resource any thing or quality that is
  useful.
• Our theory focuses on the differences that
  characterize entrepreneurs and the founding of
  their companies.
• Firms have therefore different starting points
  for resources (resource heteorgeneity) and other
  firms cannot get them (resource immobility).

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Resource-based theory

• Firms usually begin with a relatively small
  amount of strategically relevant resources and
  skills.
• Firms buy/acquire resources and skills cheaply
• gt transform the resource or skill into a product
  or service
• gt deploy and implement the strategy
• gt sell dearly (for more than you initially paid)

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What is the difference between competitive
advantage and sustained competitive advantage?
Creates compet. advantage
Resource Dimension
No compet. advantage
Exploits opportunity Neutralizes threats
Not suited to the environment Common
Valuable resources
Unique Costly to produce
Readily available Inexpensive
Rare resources
Unique history, causally ambiguous, socially
complex
Ordinary history Causality known Socially simple
Hard to copy resources
Not possible through similar modes, different
modes
Easily possible through similar modes, different
modes
Substitutable resources
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• Types of resources PROFIT factors
• Physical
• Reputational
• Organizational
• Financial
• Intellectual (human)
• Technological
• Are broadly defined and include all assets,
  capabilities, organizational processes, firm
  attributes, information and knowledge.
• These resources may confer specific advantage or
  none.

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Entrepreneurs born or made?

• Are you born an entrepreneur?
• Not everyone will succeed as an entrepreneur, and
  sometimes the people who do succeed do so only
  after a number of painful attempts.
• The true test of your entrepreneurial potential
  is in the marketplace, not in the classroom.
• remind our little quiz

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Entrepreneurs born or made?

• David McClelland (1961) described the
  entrepreneur as primarily motivated by an
  overwhelming need for achievement and strong urge
  to build.
• (May 20, 1917March 1998) was an American
  psychological theorist. Noted for his work on
  achievement motivation and the conciousness, he
  published a number of works from the 1950s until
  the 1970s and had a hand in the creation of the
  scoring system for the Thematic Apperception
  Test.

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Entrepreneurs born or made?

• Collins and Moore (1970) questioned and studied
  150 entrepreneurs and concluded that they are
• tough, pragmatic people driven by needs of
  independence and achievement. they seldom are
  willing to submit to authority.

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Entrepreneurs born or made?

• Bird (1992) sees entrepreneurs as mercurial, that
  is prone to insights, brainstorms, deceptions,
  ingeniousness and resourcefulness. Entrepreneurs
  are cunning, opportunistic, creative and
  unsentimental.

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Entrepreneurs born or made?

• Cooper, Woo, Dunkelberg (1988) argue that
  entrepreneurs exhibit extreme optimism in their
  decision making processes.
• In a study of 2.994 entrepreneurs they report
  that 81 indicate their personal odds of success
  as greater then 70
• and a remarkable 33 seeing odds of success of 10
  out of 10.

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Entrepreneurs born or made?

• Busenitz and Barney (1997) claim entrepreneurs
  are prone to overconfidence and over
  generalisations.

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Entrepreneurs born or made?

• Cole (1959) found there are 4 types of
  entrepreneur
• the innovator
• the calculating inventor
• the over-optimistic promoter
• the organisation builder
• These types are not related to the personality
  but to the type of opportunity the entrepreneur
  faces.

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Entrepreneurs born or made?

• Richard Branson "Business opportunities are like
  buses, there's always another one coming.
• Anita Roddick "Nobody talks about
  entrepreneurship as survival, but that's exactly
  what it is and what nurtures creative thinking.
  Running that first shop taught me business is not
  financial science it's about trading buying and
  selling."

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Psychological approach

• Are there personality characteristics that help
  us predict who will be an entrepreneur and who
  will not?
• Most frequently discussed characteristics are
• Need for achievement
• Locus of control
• Risk-taking behaviour
• Place or position where something is
  particularly known to exist or happen

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Need for achievement

• The entrepreneurial need for achievement n Ach
• People with high levels of n-Ach have a strong
  desire to solve problems on their own, enjoy
  setting goals and achieving them through their
  own efforts, and like receiving feedback on how
  they are doing. They are moderate risk takers.
• Scientifically, the link between n-Ach and small
  business ownership has not been proven (yet).

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Locus of control

• 2 types of people
• Internals who believe that for the most part the
  future is theirs to control through their own
  efforts.
• Externals who believe that what happens to them
  is a result of fate, chance, luck or forces
  beyond their control.
• Are there more internals among entrepreneurs?
• gt scientifically, we are not sure

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Risk taking behaviour

• Because the task of new venture creation is
  apparently fraught with risk and the financing of
  these new ventures is often called risk
  capital, researchers have tried to determine
  whether entrepreneurs take more risks than other
  business people.
• In a well-known study however, risk-taking
  behaviour is not a distinguishing characteristic
  of entrepreneurs.

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Sociological approach

• Explaining the social conditions from which
  entrepreneurs emerge.
• What drives entrepreneurs towards
  self-employment?

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• Negative displacement. This is the alienation of
  individuals or groups from the core of society.
• Because they are on the outer fringes of the
  economy they are sensitive to the allure of
  self-employment (think of certain ethnic groups)
• gt 65 of Korean immigrants in NYC area own at
  least one business.
• Other negative displacements being fired from a
  job/being angered or bored by current employment,
  middle-age, divorce, etc.

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• Being between things, for example between
  student life and career.
• Positive pull from a potential partner, mentor,
  parent, investor or customer.
• Positive push a career path that offers
  entrepreneurial opportunities or an education
  that gives the appropriate knowledge and
  opportunity (hoping to do that with you students
  now!).

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• Situational characteristics will determine
  whether the new venture takes place or not
• Perceptions of desirability entrepreneurship
  must be seen as desirable. This may depend on
  culture, society and even religion
• Perceptions of feasibility potential
  entrepreneurs need examples of what is possible.
  Emotional, financial and physical support is
  needed.

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Individual Characteristics Personal resources
Need for achievement, locus of control,
propensity for taking risk, knowledge,
experience, reputation Sociological factors
Perceptions of desirability and feasibility, role
models and mentors, entrepreneurial parents,
networks and contacts Demographics Age, gender,
education

• Organization
• Strategies
• Generic strategies
• Cost leadership
• Differentiation
• Focus
• Isolating mechanisms
• Entry wedges
• New product/service
• Parallel competition
• Franchise entry
• Organizational culture

Environment Resources Venture capital/financial
resources availability Presence of experienced
entrepreneurs Technically skilled labor
force Accessibility of customers/suppliers Availab
ility of land, transportation, Etc..
New Venture Creation
Constraints in the environment Barriers to entry
Governmental influences, rivalry among existing
competitors, pressure from substitute products,
bargaining power of suppliers, bargaining power
of buyers