MODULE1: TECHNOLOGY BASED ENTREPRENEURSHIP
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OBJECTIVES LECTURES NOTES Introduction An Entrepreneurial Perspective. Defining Entrepreneurship. Traits versus Characteristics. Creative as a prerequisite to Innovation. Innovation and Entrepreneurship. Significant ways for new enterprise. TRANSPARENCIES
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MODULE1: TECHNOLOGY BASED ENTREPRENEURSHIP
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Objectives Define Entrepreneurship and discus the characteristics of Entrepreneurs. Discus the importance of creativity and innovation to Entrepreneurship. Compare and contrast the attitudes and behavior of entrepreneurial manager and the trustee with respect to creativity and innovation. Explain the innovation process, the characteristics of innovative organizations, the critical innovation roles, and the barriers to innovation in the organizations. Compare and contrast power bases, managerial behaviors, and advantages and disadvantages associated with alternative planned change strategies.
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Lectures Notes
ENTREPRENEURSHIP1
INTRODUCTION2
The concept of entrepreneurship has been around for a very long time, but its resurgent popularity implies a sudden discovery, as if we had stumbled onto a new direction for American enterprise. This is a myth, as we shall see, because the American system of free enterprise has always engendered the spirit of entrepreneurship. America was discovered by entrepreneurs, and the United States became a world economic power through entrepreneurial activity. More important, our future rests squarely on entrepreneurial ventures founded by creative individuals. They are inspired people, often adventurers, who can at once disrupt a society and instigate progress. They are risk takers who seize opportunities to harness and use resources in unusual ways, and entrepreneurs will thrust us into the twenty-first century with a thunderous roar.
An Entrepreneurial Perspective
Entrepreneurship is one of the four mainstream economic factors: land, labor, capital, and entrepreneurship. The word itself, derived from 17th-century French entreprendre, refers to individuals who were undertakers, meaning those who undertook the risk of new enterprise. They were contractors who bore the risks of profit or loss, and many early entrepreneurs were soldiers of fortune, adventurers, builders, merchants, and, incidentally, funeral directors. Early reference to the entrepreneur in the 14th century spoke about tax contractors individuals who paid a foxed sum of money to a government for the license to collect taxes in their region. In the 19th century, entrepreneurs were the captains of industry, the risk takers, the decision makers, the individuals who aspired to wealth and who gathered and managed resources to create new enterprises. Notable early French, British, and Austrian economists wrote enthusiastically about entrepreneurs as the change agents of progressive economies.
USE TRANSPARENCIES SLIDES ENTRE1.PPT Holt, David H., Entrepreneurship: New Venture Creation, Prentice Hall: 1992. ENTREPRENEURSHIP
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Economics and Entrepreneurship
Richard Cantillon, a French economist, was credited with giving the concept of entrepreneurship a central role in economics. In his Essaisur la nature du commerce en gnral, Cantillon described an entrepreneur as a person who pays a certain price for a product to resell it at an uncertain price, Thereby making decisions about obtaining and using resources while consequently assuming the risk of enterprise. A critical point in Cantillons argument was that entrepreneurs consciously make decisions about resources allocations. Adam Smith spoke of the enterpriser in his 1776 Wealth of Nations as an individual who undertook the formation of an organization for commercial purposes. In Smiths view, entrepreneurs reacted to economic change, thereby becoming the economic agents who transformed demand into supply. French economist Jean Baptiste Say, in his 1803 Trait d economie politique, described an entrepreneur as one who possessed certain arts and skills of creating new economic enterprises, yet a person who had exceptional insight into societys needs and was able to fulfill them. In 1848, British economist John Stuart Mill elaborated on the necessity of entrepreneurship in private enterprise. The term entrepreneur subsequently became common as a description of business founders, and the fourth factor of endeavor was entrenched in economic literature as encompassing the ultimate ownership of a commercial enterprise. Carl Menger (1840-1921) established the subjectivist perspective of economics in his 1871 Principles of Economics. The entrepreneur becomes, therefore, the change agent who transforms resources into useful goods and services, often creating the circumstances that lead to industrial growth. However, Menger saw the entrepreneur as an astute individual who could envision this transformation and create the means to implement it. Menger assigned priority numbers to different events in this chain so that a high-priority event would have a low number (e.g., 1) and would be an ultimate end use to satisfy a human need. At the other extreme, Menger assigned a low-priority event with a high number (e.b., 8), and this might represent raw material needed to create the number 1 event; fields of unharvested wheat would have a low priority.
Entrepreneurship as a Process
Joseph Schumpeter, Austrian economist revived the concept of entrepreneurship when he joined Harvard University and his work was published in the United States in 1934. Schumpeter described entrepreneurship as a force of creative destruction whereby established ways of doing things ate destroyed by the creation of new and better ways to get things done.
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MODULE1: TECHNOLOGY BASED ENTREPRENEURSHIP
Defining Entrepreneurship
The entrepreneur seeks, in Schumpeters word, to reform or revolutionized the pattern of production by exploiting an invention or, more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way, by opening up anew source of supply of materials or a new outlet for products . . . . Entrepreneurship, as defined, essentially consists in doing things that are not generally done in the ordinary course of business routine.
The evolution of the concept has generated many definitions, but perhaps a recent one by writer Robert Ronstand captures its essence. we shall use Ronstads definition of entrepreneurship: Entrepreneurship is the dynamic process of creating incremental wealth. This wealth created by individuals who assume the major risks in terms of equity, time, and/or career commitment of providing value for some product or service. The product or service itself may or may not be new or unique but value must somehow be infused by the entrepreneur by securing and allocating the necessary skills and resources.
Traits versus Characteristics
In an effort to understand entrepreneurs better, researchers have sought to define traits common to a majority of individuals who start and operate new ventures. John Hornaday of Babson College was among the first to use surveys and intense interviews to develop a composite list of entrepreneurial traits,
Characteristic of Successful Entrepreneurs Self-confident and optimistic Able to take calculated risk Respond positively to challenges Flexible and able to adapt Knowledgeable of markets Able to get along well with others Independent minded Versatile knowledge Energic and diligent Creative, need to achieve Dynamic leader Responsive to suggestions Take initiatives Resourceful and persevering Perceptive with foresight Responsive to criticism
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Entrepreneurship and Innovation
Creative as a prerequisite to innovation
The terms creativity and innovation are often used to mean the thing, but each has a unique connotation.
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Creativity - is the ability to bring something new into existence. This definition emphasizes the ability, not the activity, of bringing something new into existence. Innovation - is the process of doing new thing.
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Innovation, therefore, is the transformation of creative ideas into useful applications, but creativity is a prerequisite to innovation.
The Creative Process
Entrepreneurs need ideas to pursue, and ideas seldom materialize accidentally. Ideas usually evolve through a creative process whereby imaginative people, germinate ideas, nuture them, and develop them successfully. Various labels have been applied to stages in the creative process, but most social scientist agree on five stages that we label as: A model of the creative process: Idea Germination Preparation Incubation Illumination Verification
Idea Germination: The seeding stage of a new idea Recognition
Preparation: Conscious search for knowledge Rationalization
Incubation: Subconscious assimilation of information Fantasizing
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Illumination: Recognition of ideas as being feasible Realization
Verification: Application or test to prove ideas has value Validation
Innovation and Entrepreneurship
It is important to recognize that innovation implies action, not just conceiving new ideas. When people have passed through the illumination and verification stages of creativity, they may have become inventors, but they are not yet innovators. The difference between invention and innovation is: Invention - is the creation of new products, processes, and technologies not previously known to exist. 2. Innovation - is the transformation of creative ideas into useful applications by combining resources in new or unusual ways to provide value to society for or improved products, technology, or services.
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Elements in the Innovation Process
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Analytical Planning - to identify: product design, market strategy, financial need Organizing Resources - to obtain: materials, technology, human resources, capital Implementation - to accomplish: manufacturing, services organization, product design,
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Commercial Application - to provide: value to customers, reward of employees, revenues for investors, satisfaction for founders
Your own new enterprise serves your interest in significant ways:
Salary. Nothing can spin out money like a profitable company. You should, in time, be able to make a far higher salary that you could ever earn working for someone else.
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Security. If you can consistently earn a big salary for many years running, you can take long step toward security. Beyond that lies a company profit-sharing plan, a retirement program, started at the moment that you company enter black, that will pile up a splendid asset for your later years. Assets builder. As your company grows and become more profitable, it takes on value. It becomes a separate unit which can be sold for a sum money. Naturally, the more profitable it becomes , the more it is worth. Perks. A company allows you the use of an automobile for business purposes, along with a host of other small advantages. it will make you a short-term loan or pay for your home security system. Independence. Your own business can set you free from financial worries. It removes the necessity to beholden to an employer. It allows you independence and freedom from bosses and supervisors. Fulfillment. The excitement and challenge of your own enterprise makes life immensely stimulating. You derive a deep, psychological satisfaction from doing business, and you banish boredom and restlessness from your life.
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