Myths, Theories and Frameworks of Entrepreneurship

Objectives• To discuss the main myths about

entrepreneurship.• To discuss the main theories of

entrepreneurship.• To discuss the main frameworks related

to entrepreneurship.

Myths about Entrepreneurship • Entrepreneurs are only doers but not thinkers.• Entrepreneurs are born and not made.• Entrepreneurs are always inventors.• Entrepreneurs are anti-academic and socially misfits.• Entrepreneurs must fit into ideal profile• All Entrepreneurs are money minded people. • Entrepreneurs are badly need the luck.• Ignorance is a bliss for entrepreneurs.• Entrepreneurs seeks success but end with high failure rates. • Entrepreneurs are extreme risk takers.• Entrepreneurs are hating partnership.• Entrepreneurs never succeeds in clusters.• Entrepreneurs must be young.• Entrepreneurs are mainly backed by VCs.• Entrepreneurs need always new products.• Entrepreneurs do not have place in big companies.

Models for Entrepreneurship

• Silicon Valley model - Siliconitis is the most common example of what is now an almost universal search among policymakers, local as well as central, for the secrets of entrepreneurial success. It is also the most instructive. A few attempts to replicate Silicon Valley, most notably in Israel, have succeeded. But most are embarrassing failures.

• Anchor-firm model - Alfred Marshall, one of the first economists to write about entrepreneurship, said that successful entrepreneurs are like large trees in a forest, towering over their neighbours and depriving them of light and air. In fact, the big trees usually produce lots of little ones. They spin off subsidiaries, provide experience to employees who then decide to go it alone, and nurture dozens of suppliers.

Models for Entrepreneurship

• Crisis driven model - People become entrepreneurs when the economy stops supplying jobs. This happened in the San Diego region in the 1990s when the end of the cold war threw hundreds of highly trained military scientists out of work. Local start-ups such as Qualcomm hoovered up the talent and put it to new uses.

• local-hero model in which a local entrepreneur sees an opportunity, starts a business and turns it into a giant.

Approaches to Entrepreneurship

Macro Entrepreneurial school of thought• Environmental school of thought• Financial/Capital school of thought• Displacement school of thought

Micro Entrepreneurial school of thought• Entrepreneurial traits school of thought (people

school)• Venture opportunity school of thought • Strategic formulation school of thought

Environmental school of thoughtInfluence of external factors to initiate business1. Man made environment2. Natural environment3. Family and social factors4. Local economic, social and political environment.5. Regional economic, social and political environment.6. National economic, social and political environment.7. International economic, social and political

environment.

Financial/Capital school of thought

The entire focus of this school is capital seeking process of business start and growth.

• Venture capital• Angel capital• Debt/loans• Equity• Family• Friends• Fools• Luck

Displacement school of thoughtPeople never start business unless they are

prevented or displaced from other activities.• Political displacement – allowing or not

allowing people to start business in some areas.

• Cultural displacement – some social groups are precluded from some professional fields.

• Economic displacement – bad economic times give many opportunities to start business people putting out of the work.

Entrepreneurial traits school of thought (people school)

This school analyses common characteristics or traits of entrepreneurs.

• Achievement, creativity, determination and technical knowledge.

• Family background and educational incubation.

• This school says certain traits developed or inherited may be the key to entrepreneurship.

Venture opportunity school of thought This school analyze factors relevant to opportunity

aspects of the venture development.• Sources of business ideas• The development of business concept• Implementation of the venture opportunity1. Creativity, innovation and market awareness2. Right business idea, right time for right market

niche.3. Corridor principle – Whenever new opportunity

emerge ability to capture and materialize them.

Strategic formulation school of thought

This says that strategic planning process help to be successful venture creators.

• Identification of unique markets• Identification of unique people• Identification of unique products• Identification of unique factors of

production

Process approach for entrepreneurshipUnder this various models and methods attempt

to structure entrepreneurship process and its various influencing factors.

• Integrative approach (Inputs and out puts of entrepreneurial process)

• Assessment approach (Assessment of venture and venture environment in various perspectives)

• Multi-dimensional approach (Entrepreneurship is analyzed in multi-dimensional ways and means)

Integrative approach • Inputs (Environmental opportunities, Entrepreneurial individuals, An organizational

context, Unique business concept, Resources)• Entrepreneurial process (Identify the opportunity,

Assess and acquire necessary resources, Implementation)

• Entrepreneurial intensity (innovation, risk taking, proactiveness)

• Outcomes (New venture, value creation, new products, process and services, New technologies, profits, personnel benefits, employment, asset, revenue…..)

Assessment approachThis approach analyses venture creation and

its conducive environment under the following headings:

• Qualitatively• Quantitatively• Strategically• Ethically• Venture maturity

Multi-dimensional approachMore detailed process approach: analyses various qualities of

entrepreneurs under the headings of individual, environment, organization and process.

1. Individual factors (need for achievement, locus of control, risk taking propensity, job satisfaction, previous work experience, family background, age, education…..)

2. Environment (venture capital availability, presence of experience entrepreneurs, technically skilled labor force, accessibility of suppliers, customers and new markets, government influence, proximity to Universities, infrastructure availability, attitudes of the people in location, living conditions….)

3. Organization (type of the firm, partners, strategic variables…)4. Process (Location, resources accumulation, marketing,

responding to outsiders….)

The Entrepreneur ProcessThe Entrepreneur Process1. Motivation to make a difference2. Ability to create and innovate3. Opportunity spot and exploit4. Find the required resources5. Uses networks extensively6. Determined in the face of adversity7. Manage the risks8. Overcoming obstacles through9. Control business10.Putting customer first, creation of overall

capital.) See ppt diagram in next slide.16

The Entrepreneur Process

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3. Creativity and innovation1.

Motivation to make a difference

3 .Spotting and

Exploiting Opportunities

Overcoming

Obstacles

10.Financial Social, aesthetic, capital

8.Controling the business

9.Putting the customer first

GROWING ENTERPRISE

THAT SUCSESS

6.Showing determination in the face of adversity

7.Managing risk

4.

Finding the

Required

Resources

5.

Using networks

extensively

Recognition of value

2. Creativity and innovation

The entrepreneur, the opportunity spotter and the project champion

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The enterprising person who realizes

The opportunity and is minded to

Engage it.

The opportunity- spotter The projected champion

The entrepreneur

The person who makes things happens. The inventor

The

Idea

Realizing

The

Opportunity

Engaging the idea

And opportunity

Exploiting the opportunity to build something

Of value

The entrepreneur, the opportunity spotter and the project champion

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The Opportunity-spotter

Idea

The project champion

Oppor-

tunity

Market gapSuccessful

business

The entrepreneur

Gallup’s Entrepreneur perceiver interview• This identify various behavioral

characteristics and personnel attributes of entrepreneur under various themes.

• Most of the Entrepreneurial Centers around the world use this as guideline to prepare various tests to check entrepreneurial abilities.

• These characteristics are outlined as striving talents, thinking talents and relating talents.

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Gallup’s Entrepreneur perceiver interviewSome of these characteristics areDedication: consumed by a goal or purposeFocus: discriminates and targetProfits orientation: advantage focusEgo drive: wants to make a recognized difference Urgency: no time to waste and must take action nowCourage: determined in the face of adversityActivator: wants to make it happenOpportunity: sees possibilities not problemsCreativity: buzzing with ideas Expertise orientation: knows own limits and find expertsTeam: gets the right people togetherIndividual perception: see and uses strengths of others.

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Gallup’s Entrepreneur perceiver interview• Using entrepreneurial triangle we can explain

this inter-relationship: creating, going for opportunities, building support and doing. See ppt diagram in slide.

• Talent, temperament and technique: Gallup questions can arrange according to talent, temperament and technique framework. This gives an another perspective for entrepreneurs. See ppt diagram in next slide.

• The ‘well of talent’ is another concept to show how hard to identify people with entrepreneurial skills and develop them as real entrepreneurs. See ppt diagram in next slide.

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Entrepreneurial Triangle

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Going for opportunities

Doing

Courage

Profit

Orientation

Ego Drive Activator

UrgencyDedication

Expertise Orientation

Figure…..The Entrepreneurs Triangle

Opportunity

Creativity

Focus

Team

Individualized

Perception

Talent, Temperament and Technique

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Competition

Performance Orientation

Dedication

Activator

Opportunity taking

Advantage Orientation

Creativity

Networker

Team

Resourcing

Opportunity spotting

Courage

Focus

Talent Abilities

Urgency

Responsibility

Needs TEMPERAMENT Drives

Ego Drive

Mission

TECHNIQUE

The entrepreneur’s

Skill

setExperience

Techniques to develop

Talents & manage

temperament

The Well of Talents

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Operational managers

Followers

I n v e n t o r s

En

tre pr en eu rs

L e a d e r s

Project champions

Enterprising managers

Questions