Enterprise Project CBTM5001

1. Enterprise ProjectCBTM5001 Lecture 2

2. Learning outcomes What is an entrepreneur Entrepreneurship and Small Business Characteristics of an Entrepreneur 1

3. Discussion • What is an entrepreneur?

4. What is Entrepreneur? “ a person who sets up a business or businesses, taking on greater financial risks in order to do so”. New Oxford Dictionary of English 1

5. Entrepreneur? • Originated in seventeenth-century France; • ‘Differences among entrepreneurs and among their ventures are as great as the variations between entrepreneurs and non-entrepreneurs and between new and established firms’ -Gartner (1985)

6. Entrepreneur? • A manager undertaking an activity – i.e. in terms of the particular tasks they perform and the way they undertake them; • An agent of economic change – i.e. in terms of the effects they have on economic systems and the changes they drive; and as • An individual – i.e. in terms of their psychology, personality and personal characteristics -Wickham (1998)

7. Entrepreneur? • Often the term entrepreneurship is equated with new venture creation and small business management (Gibb, 1996), and the concept of owner-management and self-employment. - Kirby (2001) • Not all owner-managers can be regarded as entrepreneurs.

8. Entrepreneurship • 1803 (Jean Baptiste Say) - separated profits of entrepreneur from profits of capital. • 1876 (Francis Walker) - distinguished between those who supplied funds and received interest and those who received profit from managerial capabilities. • 19th Century: terms entrepreneur and manager were often used interchangeably; concept of personal gain was central, and the importance of investment of time, skills, innovation.

9. Entrepreneurship • 1934 (Joseph Schumpeter) - entrepreneur is an innovator and develops untried technology. • 1961 (David McCelland) - entrepreneur is an energetic, moderate risk taker. • 1964 (Peter Drucker) - entrepreneur maximises opportunities.

10. Entrepreneurship • 1975 (Albert Shapero) - entrepreneur takes initiative, organises some social and economic mechanisms, and accepts risks of failure. • 1980 (Karl Vesper) - entrepreneur seen differently by economists, psychologists, business persons, and politicians. • 1982 (Casson) - "someone who specialises in making judgemental decisions about the co-ordination of scarce resources"

11. Entrepreneurship • 1983 ( Gifford Pinchot) - intrapreneur is an entrepreneur within an already established organisation. • 1985 (Robert Hisrich) - entrepreneurship is the process of creating something different with value by devoting the necessary time and effort, assuming the accompanying financial, psychological and social risks, and receiving the resulting rewards of monetary and personal satisfaction.

12. Entrepreneurship • 1998 (Wickham) - entrepreneur as - a manager undertaking an activity, an agent of economic change, an individual. • 20th Century: entrepreneur as an innovator was established

13. Definition of Entrepreneurship “Entrepreneurship, rigorously defined, refers to the creation of a new economic entity centred on a novel product or service or, at the very least, one which differs significantly from products or services offered elsewhere in the market place.” - Curran and Stanworth

14. Perspectives Economic: as seen above Psychological: personality traits need to achieve, attitude to risk, be in control, autonomy, determination, initiative, creativity, self-confidence and trust Sociological approaches: importance of family members, culture, education

15. Entrepreneurship • Entrepreneurship—a way of thinking, reasoning, and acting that is opportunity obsessed, holistic in approach, and leadership balanced (This definition of entrepreneurship has evolved over the past two decades from research at Babson College and the Harvard Business School and has recently been enhanced by Stephen Spinelli, Jr., and John H. Muller, Jr., Term Chair at Babson College.)

16. Entrepreneurship • Trends for the new Millennium: • An emphasis on social responsibility; • A focus on the environment; • A global orientation; • Fitness and health; • The aging population; • Consolidation of industries -Kathleen (1999)

17. What is entrepreneurship? • A process, not a state of being. It is concerned with change, and the management of that change.

18. Entrepreneur? • The entrepreneur’s tasks: • Owning organisations • Founding new organisations; • Bringing innovation to market; • Identification of market opportunity; • Application of expertise; • Provision of leadership; • The entrepreneur as manager

19. Entrepreneur? • An entrepreneur is an individual who establishes and manages a business for the principal purpose of profit and growth. The entrepreneur is characterised principally by innovative behaviour and will employ strategic management practices in the business. • An entrepreneurial venture is one that engages in at least one of Schumpeter’s five categories of behaviour: that is, the principal goals of an entrepreneurial venture are profitability and growth and the business is characterised by innovative strategic practices. - Carland et al. (1984) (more)

20. Entrepreneur? • A small business owner is an individual who establishes and manages a business for the principal purpose of furthering personal goals. The business must be a primary source of income and will consume the majority of one’s time and resources. The owner perceives the business as an extension of his or her personality, intricately bound with family needs and desires. • A small business venture is any business that is independently owned and operated, not dominant in its field, and does not engage in any new marketing or innovative practices. - Carland et al. (1984) (cont.)

21. Relationship between entrepreneurship & small business Birley (In Burns & Dewhurst, 1994 ) Carland et al (1984) construct two dichotomies: Small Business Venture v. Entrepreneurial Venture Small Business Owner v. Entrepreneur A difficulty with this is that it assumes that categorisation is possible entirely in terms of motivations and personal drive. However evidence suggests that there is often no apparent relationship between the reasons owner managers give for starting and the subsequent size or performance of their business.

22. Relationship between entrepreneurship & small business Small Business Venture – any business that is independently owned and operated, not dominant in its field, and does not engage in any new marketing or innovative practices. Entrepreneurial Venture – one that engages in at least one of Schumpeter’s four categories of behaviour: that is, the principal goals of an entrepreneurial venture are profitability and growth and the business is characterised by innovative strategic practices Birley (1994)

23. Relationship between entrepreneurship & small business Small Business Owner – an individual who establishes and manages a business for the principal purpose of furthering personal goals. The business must be the primary source of income and will consume the majority of the owner’s time and interest. The owner perceives the business as an extension of his or her personality, intricately bound with family needs and desires. Entrepreneur– an individual who establishes and manages a business for the principal purpose of profit and growth. The entrepreneur is characterised principally by innovative behaviour and will employ strategic management practices in the business. Birley (1994)

24. Relationship between entrepreneurship & small business Storey & Sykes (in Burns & Dewhurst, 1994) ‘Link between small firm and entrepreneurship is clear at the intuitive level. The small firm is less concerned with formal systems and its decision-making processes will be more judgemental, involving fewer individuals and can therefore be quicker. It can be much more responsive to changes in the market-place but, conversely, is much less able to influence such developments. Hence the small firm is likely to adjust more quickly than the large firm to situations of market disequilibrium and in these senses, embodies the characteristics of the classic entrepreneur’.

25. Relationship between entrepreneurship & small business BUT not all small businesses are entrepreneurial businesses. Storey and Sykes then focus on uncertainty (market, customer and aspirational), innovation(new good, new process, new market, new supply source, new type of organisational structure) and management as potential separating factors.

26. Relationship between entrepreneurship & small business Deakins (1996) Small business objectives - survival - life-style maintenance Entrepreneurial objectives - growth - expand employment - develop into a large or medium sized enterprise

27. Growth potential Entrepreneurial venture Innovation Small business Strategic objectives Wickham (2001)

28. Relationship between entrepreneurship & small business Different roles in the economy of entrepreneurial ventures and small businesses (Wickham, 1998) • Entrepreneurial venture is usually based on significant innovation, a significantly new way of doing things. Small business usually delivers an established product or service • Entrepreneurial ventures have a greater potential for growth. A small business operates within a given market; the entrepreneurial venture is in a position to create its own market. • Entrepreneurial ventures have stronger and clearer strategic objectives

29. Characteristics of Entrepreneurs • Characteristics of entrepreneurs • Types of entrepreneurs • Moving into entrepreneurship

30. Who becomes an entrepreneur • The Inventor • The unfulfilled manager • The displaced manager • The young professional • The excluded (from Wickham, 1998)

31. Characteristics of entrepreneurs Joseph R Mancuso (US Centre for Entrepreneurial Management), in Dewhurst, Burns & Dewhurst ‘It is not the critic; nor the observer who watches from a safe distance. Wealth is created only by doers in the areas who are marred with dirt, dust, BLOOD AND SWEAT. These are producers who strike out on their own, who know high highs and low lows, great devotions, and who overextend themselves for worthwhile causes. Without exception, they fail more than they succeed and appreciate this reality even before venturing out on their own. But when these producers of wealth fail, they at least fail with style and grace, and their gut soon recognises that failure is only a resting place, not a place in which to spend a lifetime. Their places will never be with those nameless souls who know neither victory nor defeat, who receive weekly paycheques regardless of their week’s performance, who are hired hands in labour in someone else’s garden. These doers are producers and no matter what their lot is at any given moment, they’ll never take a place beside the takers, for theirs is a unique place, alone, under the sun.’

32. Characteristics of entrepreneurs Dewhurst in Burns & Dewhurst (1996) • Doers • Sweat • Overextending • Venturing alone • Style and grace

33. Characteristics of entrepreneurs Doers • Belief driven • Desire to succeed • Want to achieve new and challenging goals • Hate delay, like to get on with work in hand • Accept obstacles, believe they can overcome all obstacles

34. Characteristics of entrepreneurs Sweat • Commitment • Perseverance • Hard work and single-mindedness • Work as hobby, hobby as work • 'Controlled' leisure and life-style • Determination

35. Characteristics of entrepreneurs Overextending • Failure is a learning experience • Quick learners • Need to know how well (or how badly) they are doing (importance of feedback)

36. Characteristics of entrepreneurs Venturing alone • Calculated risk takers, maximising odds in their favour • Long term strategic planning • Goal (i.e. market) orientation

37. Characteristics of entrepreneurs Style & Grace • Reputation for reliability and integrity is important • Flexible and creative • Vision

38. Dark side of entrepreneurship (Entrepreneurs are difficult/impossible employees) • Control • Quirks • Social attitudes • Hardship, self-reliance and discipline - Dewhurst (1996)

39. Dark side of entrepreneurship Control • Difficulty of 'controlling' • Importance of motivating and empowering employees • Recognition that staff may not necessarily have same drive/vision as entrepreneur

40. Dark side of entrepreneurship Quirks • Unconventional approaches • Need for recognition • Power

41. Dark side of entrepreneurship Social attitudes • Negative British attitude to entrepreneurial traits • Production/manufacturing as a poor relation of rest of economy • Low public image of the 'self made person'

42. Dark side of entrepreneurship Hardship, self-reliance and discipline • Difficult reliance • Lack of support • Isolation

43. Types of entrepreneur Classify by - individuals business venture Opportunist entrepreneur - growth-orientation independence-orientation Craftsmen – traditional skills scientific or high-technology

44. Types of entrepreneurs Webster (1977), types of Entrepreneurs • Classic entrepreneur identifies an unexploited opportunity & innovates to pursue it • Industry maker goes beyond this to create a whole new industry • Administrative entrepreneur • Small business entrepreneur Three types of entrepreneurial venture: • large payoff: many participants (investors) • small payoff: few participants • Large payoff: few participants

45. Gambler Entrepreneur High Risk bearing Low Consolidator Dreamer Low High Innovativeness Landau’s classification of entrepreneurial types

46. Types of entrepreneurs Wai-Sum Siu (1996) (in Wickham) Chinese position • Senior Citizen entrepreneur • Workaholics • Swingers • Idealists • High-flyers

47. Types of entrepreneurs Senior Citizen entrepreneur • to keep busy • small & based on personal experience • privately funded • no long-term strategic aims Workaholics • often also retired • greater commitment • bigger, more technical • explicit strategic goals Wai-Sum Siu (1996) (in Wickham)

48. Types of entrepreneurs Swingers • younger entrepreneurs • aim to make a living from making deals • limited industrial & technical experience • rely on networks Idealists • also younger • moderate sized ventures • motivated by achievement & independence • financing through retained profits Wai-Sum Siu (1996) (in Wickham)

49. Types of entrepreneurs High-flyers • highly motivated • explicit corporate goals Wai-Sum Siu (1996) (in Wickham)

50. Summary What is an entrepreneur Historical Perspectives Entrepreneurship and Small Business Characteristics of an Entrepreneur Types of entrepreneurs 1