Entrepreneurship – some views from the UK Professor Ronald W. McQuaid Malcolm Greig

1. Employment Research Institute Napier University Entrepreneurship – some views from the UK Professor Ronald W. McQuaid Malcolm Greig Shandong University of Finance, Jinan, P.R. China March 2005

2. Employment Research Institute Napier University Adam Smith1723-1790economist from Scotland

4. Employment Research Institute Napier University OUTLINE OF THE TALK • What is entrepreneurship? • Types of business start-up entrepreneurs • Policies to support new businesses

5. Employment Research Institute Napier University Entrepreneurship in Neo-classical Economics • Output = f(K, L, N) • Capital • Labour • Land • Entrepreneurship (?)

6. Employment Research Institute Napier University PERSPECTIVES ON ENTREPRENEURSHIP • Entrepreneurship as starting a new business • Entrepreneurship as a small business (SME) owner-manager

7. Employment Research Institute Napier University Changes in Total and Self-Employment (1980 = 100)

8. Employment Research Institute Napier University Entrepreneurship as a function in the economy ØRisk ØCo-ordination, allocation and use of resources Ø‘Middleman’

9. Employment Research Institute Napier University Entrepreneurship as a function in the economy • ØInnovator – • Products • methods of production, new markets • new sources inputs • or by changing the structure of an organisation or an industry

10. Employment Research Institute Napier University Registrations and De-Registrations as % of Stock, 1999

11. Employment Research Institute Napier University Entrepreneurship as a set of personal characteristics • Samuel Smiles (1859): the key psychological traits of an entrepreneur were integrity, self-learning, courage, conscientiousness, patience, perseverance, self-discipline and self-respect.

12. Employment Research Institute Napier University Entrepreneurship as a set of personal characteristics More modern: Particular qualities or attitude motivations their being a ‘great leader’ or social forces ‘Everyman’

13. Employment Research Institute Napier University Entrepreneurship as a form of behaviour What entrepreneurs do, rather than who they are

14. Employment Research Institute Napier University Entrepreneurship as a form of behaviour PETER DRUCKER, 1985, said: an entrepreneur is a person who “always searches for change, responds to it, and exploits it as an opportunity.” entrepreneurship “consists in the purposeful and organised search for changes, and in the systematic analysis of the opportunities such changes might offer for economic or social innovation”

15. Employment Research Institute Napier University Entrepreneurship as a form of behaviour STEVENSON and SAHLMAN, 1989, “entrepreneurship is most fruitfully defined as the relentless pursuit of opportunity without regard to resources currently controlled”. So we can have “Enterprising Employees.”

16. Employment Research Institute Napier University • Entrepreneurship as starting a new business

17. Employment Research Institute Napier University Who starts an innovative business? Type 1: An experienced employee working in an established company who cannot advance any further on the career ladder in their current place of employment. Setting up their own business allows them to advance both in career and income terms. “Pull motivation”

18. Employment Research Institute Napier University Entrepreneur Backgrounds Type 2: An experienced worker in an existing company forced into setting up their own business as a result of employment insecurity caused principally by their age. “Push motivation”

19. Employment Research Institute Napier University Entrepreneur Backgrounds Type 3: A younger and well educated person. Motivations for starting businesses were more complex than in the other two cases. Major factors were a desire for independence, a means of achieving self fulfilment and an intense interest in a trade. “Pull motivation”

20. Employment Research Institute Napier University Richard Branson (Virgin) I never once started a business with the sole motivation of making money

21. Profile of an Entrepreneur

22. Employment Research Institute Napier University POLICIES • Macro-level policies to promote entrepreneurship • Stable Economy • Currency • Interest rates • Inflation • Taxation • Legal and financial system • Lack of corruption

23. Employment Research Institute Napier University Change in the Stock of (VAT) Enterprises (1000s)

24. Employment Research Institute Napier University POLICIES • Micro-level policies to promote entrepreneurship • advice and training • finance • technology • markets • physical infrastructure • entrepreneurial culture

25. Employment Research Institute Napier University How to best include dynamic entrepreneurship into our models? To improve models To improve policies

26. Employment Research Institute Napier University The End http://www.napier.ac.uk/depts/eri/home.htm

27. Employment Research Institute Napier University Success Factors in SMEs Storey (1994) provides a series of factors which appear common to growth start-up companies. ·Successful companies demonstrate an ability to shift into (usually marginal) different product markets. ·Most growing companies recruit experienced management from outside. ·Marketing expertise is critical for new companies with new products.

28. Employment Research Institute Napier University Success Factors in SMEs ·Human resource management policies should link different parts of the small firm together, and encourage team working and flexible management systems. ·Businesses which survive and grow reinvested heavily in the company and take out few profits for personal consumption.

29. Employment Research Institute Napier University Success Factors in SMEs • ·Successful companies must have good, long-term relationships with banks. This is helped by good financial management to track performance. • ·He recommends a shift away from overdrafts to longer term loans and equity investments by banks to allow more company stability. Owners of companies must also be more willing to invite outside investment from this and other sources.

30. Employment Research Institute Napier University Success Factors in SMEs • ·Those companies which are successful tend to seek quality private sector advice from solicitors, accountants and management consultants.