Monday, March 4, 2013
Entrepreneurship -additional notes
Entrepreneurship There are various works and research done in the field of entrepreneurship, entrepreneurs and entrepreneurial activities. Notable scholars from several disciplines have contributed to the understanding of the terms. The earliest view of entrepreneurship came from the perspectives of the economists. Other disciplines soon followed, amongst them are theology, economics, psychology, social psychology, sociology, organisational behaviour, business, management and strategic management (Group, 2004). In the 1960s, psychologist based theories defined entrepreneurs by describing the person. They looked into the attributes and behaviours stressed to profile the personality. During the 1960s and 1970s, the attention shifted towards entrepreneurial motivations. The push and pull factors as well as internal and external factors were examined. In the 1980s, the interests focussed towards understanding entrepreneurship as a process. There are many definition of entrepreneurship ranging from a simple explanation to adding attributes that makes up an entrepreneurial activity and behaviour. According to Goossen, (2007), Stevenson in Bhide et al (1999) notes two ways of defining entrepreneurship; either as an economic function or a set of individual traits. Drucker however disagreed with the notion that entrepreneurs are defined by their personality, but rather through their actions. He did not believe in entrepreneurial personality but noted that certain traits can be acquired or developed (Goossen, 2007). The word entrepreneur was “derived from the French word entrepende which means to undertake or start a venture”, (Bolton & Thompson, 2006). The key word in describing entrepreneurship is ‘new’ – as explained by Bartol & Martin 1998 who defined entrepreneurship as “...the creation of new enterprise”. Gartner, 1985, as quoted by Mohd Nazri Khan described entrepreneurship as “a creation of new organisation” and Draheim, 1972 described it as “the act of founding a new company where none existed before” (Gartner, 1989). This was echoed by Frederick et al, (2007), by describing entrepreneurship as “the practise of starting new organisations, particularly new businesses”, and Bateman & Snell (1996) who described it as “the act of forming a new organisation of value.” This definition has been further explained by Hisrich et al, (2010) who state that “entrepreneurship is the process of creating something new with value by devoting the necessary time and effort”. Schumpeter, (1934) as quoted by Mohd Nazri Khan (2006), stated that it could also be an act of “carrying out of new combinations of firm organization-new products, new services, new sources of raw material, new methods of production, new markets, new forms of organization.” In a list compiled by Gartner (1989), Collins and Moore (1970) also observed the entrepreneur through Schumpeter’s view that “everyone is an entrepreneur only when he carries out new combinations and loses that character as soon as he has built up his business.” They defined the entrepreneur as “organization builders who create new and independent firms” and distinguished them from “those who perform entrepreneurial functions within already established organizations.” Davids (1963) and Mescon & Montanari (1981) also defined the entrepreneurs as “founders of new businesses” (Gartner, 1989). Draheim (1972) also agreed that entrepreneurs are “new company founders”. He then further clarified that these founders “have significant ownership stake in the business and that their intention is for the business to grow and prosper beyond the self-employment stage” (Gartner, 1989). The creation of something new is usually preceded by identifying an opportunity. Opportunity as described by Moriatti, 2007 “is an idea that is based on what consumers need or want. A successful business sells products or services that customers need, at prices they are willing to pay.” Goossen (2007) distinguished opportunity from idea by arguing that “ an idea is a discovery or invention with unknown potential whereas an opportunity is something that, upon due diligence, demonstrates a reasonable likelihood of undergoing successful commercialization.” Hatten (2009) described entrepreneurship as’ the process of identifying opportunities for which marketable needs exist and assuming the risk of creating an organisation to satisfy them (Hatten, 2009). Ireland et al (2003) mentioned that ‘the essence of entrepreneurial behaviour is identifying opportunities and putting useful ideas into practice’ (as quoted by Barringer & Ireland, 2008). Indeed, opportunity is a key ingredient in entrepreneurship as evident in Timmons (1999) when he described ‘entrepreneurship is a way of thinking, reasoning and acting that is opportunity obsessed, holistic in approach, and leadership balanced’ (as quoted by Bjerke, 2007) and also Frederick et al (2007) as he described ‘entrepreneurship is more than the creation of business. The characteristics of seeking opportunities, taking risks beyond security and having the tenacity to push an idea through to reality combine into a special perspective that permeates entrepreneurs.’ Pursuing the opportunity is the next step in establishing an entrepreneurship. Shane & Ventakaraman, 2000 said that ‘entrepreneurship occurs when an enterprising individual pursues a lucrative opportunity’ (as quoted by Bateman et al, 2009). Pursuing opportunities is a vital ingredient of entrepreneurship in which the individuals disregard the resources they currently control as mentioned by H.H. Stevenson and J.C. Jarillo, 1990 (as quoted by Barringer, Bruce, R., and Ireland, R Duane, 2008). This was further clarified by Hart, Stevenson & Dial, in 1995 by adding entrepreneurship is ‘the pursuit of opportunity without regard to resources currently controlled, but constrained by the founders’ previous choices and industry-related experience’ (as quoted by Mohd Nazri Khan, 2006). This statement was echoed by Coulter, 2001 who sees entrepreneurship as ‘the process whereby an individual or a group of individuals use organised efforts and means to pursue opportunities to create value and grow by fulfilling wants and needs through innovation and uniqueness, no matter what resources are currently controlled’ (as quoted by Bjerke, 2007). Risk taking is also another ingredient in entrepreneurship. Syahida Abdullah (2008) mentioned that “..the pioneers in this field such as Cantillon (1755) and Say (1803) viewed entrepreneurship as a risk-taking activity..” The degree of the risks taken varies from ‘moderate’ (McClelland, 1961 as quoted by Mohd Nazri Khan, 2006) and ‘calculated - in terms of time, equity or career; (Kuratko and Hodgetts, 2004 as quoted by Bjerke 2007). Frederick et al (2007) also agreed that entrepreneurs start new ventures “in a very calculated, carefully thought-out manner”. Lachman (1980) defined the entrepreneur as a “person who organizes and manages a business undertaking assuming the risk for the sake of profit” (as quoted by Gartner, 1989). Palmer (1971) described the entrepreneurial function “involves primarily risk measurement and risk taking within a business organization”. He then continued to define a successful entrepreneur as “ an individual who can correctly interpret the risk situation and then determine policies which will minimize the risk involved” (as quoted by Gartner, 1989). Innovation is one concept that is mostly used when describing entrepreneurship. Drucker in particular, has focussed on innovation when defining entrepreneurship (Goossen, 2007). Drucker (1996) as quoted by Goossen said “entrepreneurs continually searches for change, responds to it and exploits it as an opportunity.” Lachman (1980) also perceived the entrepreneur as “ a person who uses a new combination of production factors to produce the first brand in the industry” (as quoted by Gartner, 1989). Roberts et al (2007), said that ‘Schumpeter in 1911 added the concept of innovation- process innovation, market innovation, product innovation, factor innovation, event organisational innovation’. Syahida Abdullah (2008) also mentioned that ‘Schumpeter (1928) introduced a new notion to the field of entrepreneurship, namely “innovation”. He noted that “the essence of entrepreneurship lies in the perception and exploitation of new opportunities in the realm of business… it always has to do with bringing about a different use of national resources in that they are withdrawn from their traditional employ and subjected to new combinations”.’ The term “Schumpeterian entrepreneurs” is used to describe the type of entrepreneurs who turn the entrepreneurial activity into more than just a creation of a company, but also into an intelligent, creative and innovative action (Cuadrado-Roura & Garcia-Tabuenca, 2008) (page 25) Others who saw innovation as part of entrepreneurship includes Hoselitz ( 1952) who defined entrepreneurship as ‘... introduction of innovations and the provision of capital’ (as quoted by Mohd Nazri Khan, 2006); Dollinger (1995) who defined it as’...the creation of an innovative economic organisation (or network of organisations) for the purpose of gain under conditions of risk and uncertainty’ (as quoted by Rwigema et al, 2004); as well as Shane, and Ventakaraman (2000) who viewed entrepreneurship as ‘the process of applying sound business and management skills to innovative concepts in order to ensure that their potential is achieved (as quoted from UNITEC Master of Business Innovation and Entrepreneurship, Part A, August 2000); and Rwigema et al, (2004) who viewed it as ‘the process of conceptualising, organising, launching and- through innovation- nurturing a business opportunity into a potentially high growth venture in a complex, unstable environment’. This is part of a thesis done by Hanis Syazwani Kamarudin. Please note that references will be uploaded later.