HEALTH ECONOMICS AND

ENTREPRENEURSHIPPS06211

PAUL MALABABPHARM

5.1.1 The concepts and principles of entrepreneurship

a) Principles of entrepreneurship b) The importance of entrepreneurship in relation to employment

c) Entrepreneur’s contribution to National Development

d) Explain National Strategy for Economic Empowerment and Poverty Reduction (NSEGPR)/MKUKUTA objectives and the National Development Vision 2025

What is entrepreneurship?

The concept of entrepreneurship was first established in the 1700s, and the meaning has evolved ever since.Many simply equate it with starting one’s own business.

◦ But it is believed to be more than that as nowadays the term has been extended to include social and political forms of entrepreneurial activity.

What is entrepreneurship? Cont,,,To some economists, entrepreneurship involves bearing the risk of a new venture if there is a significant chance for profit.Others emphasize the entrepreneur’s role as an innovator who markets his innovation. Still other economists say that entrepreneurs develop new goods or processes that the market demands and are not currently being supplied.

Some definitions Entrepreneurship is a force of “creative destruction.” Joseph Schumpeter (1883-1950) The entrepreneur carries out “new combinations,” thereby helping render industries obsolete. Established ways of doing business are destroyed by the creation of new and better ways to do them.

An entrepreneur is someone who actually searches for change, responds to it, and exploits change as an opportunity. Peter Drucker (1909-2005)

Some definitions cont,,, Entrepreneurship is the process of creating something new with value by devoting necessary time and effort, assuming the accompanying risks and receiving the resulting rewards - Hisrich 85

Entrepreneurship is the dynamic process of creating incremental wealth. The wealth is created by individuals who assume major risks, provide value for products or services for specific gains - Ronstadt 84

Entrepreneurs are Individuals who pursue opportunities regardless of resource availability - Stevenson, Grousbeck, Roberts and Bhide 99

Some definitions cont,,, Entrepreneurs are People who enter new or established markets - Lumpkin and Dess 97

Entrepreneurs are Individuals who create new organizations - Gartner 98

Entrepreneurs are Persons who are ingenious and creative in finding ways to add to their own wealth, power and prestige - Boumol 98

Definition cont,,, In deed there is no single universal definition but it can be simply defined as ◦The process of undertaking innovations which are deemed necessary or profitable while embracing the accompanied risks .

What Makes Someone an Entrepreneur

Who can become an entrepreneur? ◦There is no one definitive profile.

◦Successful entrepreneurs come in various

◦ages, income levels, gender, and race.

Sources: National Federation of Independent Business and Wells Fargo Bank

11%

33% 32%

16%

6%

2%

0%

5%

10%

15%

20%

25%

30%

35%

Percent of Owners

Under 25 25- 34 35- 44 45- 54 55- 64 65 or over

Age

Owner Ages at Business Formation

3A of entrepreneur Entrepreneur is an innovative process

characterized by 3A Aspiration Attitude Action

Who can become an entrepreneur? Cont,,,,◦Entrepreneurs differ in education and experience.

◦But research indicates that most successful entrepreneurs share certain personal attributes, including:

◦creativity, dedication, determination, flexibility, leadership, passion, self-confidence, and “smarts.”

Personal attributes cont,,,

Creativity is the spark that drives the development of new products or services or ways to do business. ◦ It is the push for innovation and improvement.

It is continuous learning, questioning, and thinking outside of prescribed formulas.

Dedication is what motivates the entrepreneur to work hard, 12 hours a day or more, even seven days a week, especially in the beginning, to get the endeavor off the ground. Planning and ideas must be joined by hard work to succeed. ◦ Dedication makes it happen.

Determination is the extremely strong desire to achieve success. It includes persistence and the ability to bounce back after rough times. ◦ It persuades the entrepreneur to make the 10th

phone call, after nine have yielded nothing. For the true entrepreneur, money is not the motivation. Success is the motivator; money is the reward.

Flexibility is the ability to move quickly in response to changing market needs. It is being true to a dream while also being mindful of market realities.

Leadership is the ability to create rules and to set goals. It is the capacity to follow through to see that rules are followed and goals are accomplished.

Passion is what gets entrepreneurs started and keeps them there. It gives entrepreneurs the ability to convince others to believe in their vision. It can’t substitute for planning, but it will help them to stay focused and to get others to look at their plans.

Self-confidence comes from thorough planning, which reduces uncertainty and the level of risk. It also comes from expertise. Self-confidence gives the entrepreneur the ability to listen without being easily swayed or intimidated.

“Smarts” consists of common sense joined with knowledge or experience in a related business or endeavor. The former gives a person good instincts, the latter, expertise. ◦ Many people have smarts they don’t recognize. A person who

successfully keeps a household on a budget has organizational and financial skills. Employment, education, and life experiences all contribute to smarts.

Every entrepreneur has these qualities in different degrees. But what if a person lacks one or more?

◦ Many skills can be learned. Or, someone can be hired who has strengths that the entrepreneur lacks.

The most important strategy is to be aware of strengths and to build on them.

Why Become an Entrepreneur?

Some reasons as to why people opt for an entrepreneurial career include;◦ Redundancy ◦ Frustrations from the current job◦ Some people are actually repulsed by the idea of working for someone else.

◦ Other people decide to become entrepreneurs because they are disillusioned by the bureaucracy or politics involved in getting ahead in an established business or profession.

◦ Some people are simply attracted to entrepreneurship by the advantages of starting a business.

41%

36%

27%

25%

5%

0% 10% 20% 30% 40% 50%

Percent of Owners

Joined family business

Wanted more control overfuture

Tired of working for someoneelse

Wanted to fulfill lifelong goal

Have been downsized or laidoff

Source: Dun & Bradstreet 19th Annual Small Business Survey, 2000

Advantages of entrepreneurshipEntrepreneurship offers a greater possibility of achieving significant financial rewards than working for someone else.It provides the ability to be involved in the total operation of the business, from concept to design and creation, from sales to business operations and customer response.It offers the prestige of being the person in charge.

It gives an individual the opportunity to build equity, which can be kept, sold, or passed on to the next generation.Entrepreneurship creates an opportunity for a person to make a contribution. Most new entrepreneurs help the local economy. A few—through their innovations—contribute to society as a whole.

Other important termsEconomics –• It is the social science that studies how

individuals and organizations in society engage in production, distribution and consumption.

Health economics ◦ Health economics is a branch of economics concerned with issues related to efficiency, effectiveness, value and behavior in the production of health services and consumption of health care.

◦ In broad terms, health economists study the functioning of the health care systems as well as health-affecting behaviors such as smoking.

Other important terms◦Enterprise

◦ A project undertaken or to be undertaken, especially one that is important or difficult or that requires boldness or energy:

◦Business Venture (small business) ◦ It is a start-up entity developed with the intention of profiting financially

◦ Created based on demand of the market (needs of consumers) or a lack of supply in the market

◦ Created by entrepreneurs or investors

◦ Joint venture: ◦ A legal entity created by two or more businesses joining together to conduct a specific business enterprise with both parts sharing profits and losses

◦ Corporate venturing,- can be defined in two ways◦ The activity of a large company investing money in a smaller company in return for a share of its profits:

◦ The fact of a large company creating a new business within the existing structure of the company:

◦Intra-preneurship◦ Intrapreneurship is the act of behaving like an entrepreneur while working within a large organization.

◦ Describes enterpreneurer like activities that are given within large organization to their employees e.g. when large entities spin-off organizations., corporate venturing

◦Intrapreneurs ◦ Are usually employees within a company who are assigned a special idea or project, and are instructed to develop the project like an entrepreneur would.

Important terms cont,,, Inversion It is the direct creation of better or more effective products, processes, services, technologies, or ideas that are accepted by markets, governments, and society. It is the use of imagination

Innovation differs from invention in that innovation refers to the use of a new idea or method, whereas invention refers more directly to the creation of the idea or method itself.

Innovation cont,,,,, Therefore, Innovation is the process by which an idea or invention is translated into a product or service for which people will pay, or something that results from this process.

In summary: innovation = (invention + creation) = (imagination + use of imagination) = Introduction of a new idea or process or product /service.

Innovation process schematically:

Challenge/ Problem

Invention

Creation

1

2

3

Innovation cont,,,,, It all starts when opportunity knocks We have to get from an idea to reality But first we need the idea creativity plays a big role

Once we have a creative solution we need innovation,

Finally we have to make sure that the innovation makes business sense◦ We can have dozens of ideas each day, but not nearly all are opportunities; only ideas that have commercial potential are!

◦ However, having more ideas clearly improves the chances of having a viable one.

So innovation requires a large element of creativity

There are four distinct types of innovation, these are as follows:

Invention - described as the direct creation of a new product, service or process

Extension - the expansion of a product, service or process

Duplication - defined as replication of an already existing product, service or process

Synthesis - the combination of existing concepts and factors into a new formulation

Innovation

Obstacles to CreativityThinking(believing) you are not creative .Loathing (hating, disliking) criticism

Fearing to look foolish Fearing mistakes and failures (see it as learning!)

Trying to have one “right/best” answer Being a creature of habit

Mental models Paradigms (shared models) You “follow the rules” blindly

Obstacles to Creativity cont…Trying to be “practical” exclusivelyTendency to avoid ambiguityFocusing exclusively on “logic” Lack of confidence Being overconfidentBecoming overly specialized

Improving CreativityRealizing the obstacles to your creativity and working against them.Expecting to be creative (self full-filling prophecy!)Expecting and tolerating failure, seeing it as a learning opportunityChallenging customs, routines, etc. Thinking outside the box

Think in opposite waysStudy other cultures

Improving Creativity cont…

See problems as interesting challenges Always ask whether there is a better way

Take creativity training, take a classSupport yourself and others

Create some thinking spaces (music, comfort, etc.), or while running?

Thinking time, schedule it! Minimize distractionsListen to others (they have different “models!”)Be a lifelong student.

The impact of Culture on entrepreneurship

The culture of a community may influence how much entrepreneurship there is within it.A community that accords the highest status to those at the top of hierarchical organizations or those with professional expertise may discourage entrepreneurship.

A culture or policy that accords high status to the “self-made” individual is more likely to encourage entrepreneurship.

The importance of entrepreneurship in relation to

employment Worldwide, economies are in the process of prolonged transition and structural adjustments. ◦ In the process, responsibility for wealth and job creation is being transferred from the public sector to the private sector of enterprise.

The disengagement of the public sector from the management of enterprises, and the effects including “retrenchment” will continue to cause uncertainties in job markets for “white-collar” employees and job seekers.

 

Employment cont,,,The private sector must meet world standards of productivity and efficiency in the use of human as well as other resources.

◦ This will retard the creation of new jobs, especially in the large enterprise sector.

At present and in the future, job seekers will find a shortage of jobs and they will have to consider new options and opportunities and compete for them. ◦ Some will need to engage in the small and medium enterprise sector. …..NEED for ENtRePreneurship

Employment cont,,,:  FACTORS WHICH AFFECT EMPLOYMENT OPPORTUNITIES

They include;Globalisation of trade and industryPolitical changeDemographyCultural changeNatural resources

Technological changeDevelopment of Physical infrastructureDevelopment of institutional infrastructureLegal positionLabour market

Entrepreneur’s contribution to National Development

It is a common agreement today that entrepreneurship is necessary for stimulating economic growth and employment opportunities in all societies. In the developing world, successful small businesses are the primary engines of job creation, income growth, and poverty reduction.

Therefore, government support for entrepreneurship is a crucial strategy for economic development.

General contribution of entrepreneurs to ND

Include;◦ Reduction of unemployment rate◦ Raise of per capita income◦ Effective Provision of social services eg. Education, health, communication etc

◦ General improvement in standard of lives due to invention of new technologies.

◦ Entrepreneurship is a key ingredient for economic dynamism.