Entrepreneurship and Innovation
Entrepreneurship has become a popular business term in the 1980s, replacing the 1970s’ focus on professionalism. It is seen as a desirable career choice due to its potential for freedom, independence, and wealth.
Large corporations, like smaller, often more successful competitors, want to become more innovative and adaptive; the long-term viability of our economy is dependent on the management process known as “entrepreneurship,” which is equally important for established businesses as it is for start-ups.
Increasing Interests in Entrepreneurship and Innovation:
Interest in entrepreneurship has risen dramatically, as indicated by the increase in new business formation. The management technique known as “entrepreneurship,” which is just as essential for established businesses as it is for beginners, was dependent on the long-term viability of our economy.
There was volatile growth in venture capital funding in the United States from 1975-1984. Public capital markets saw a sharp rise in money raised by young companies. There has been an increasing interest in entrepreneurship, which is entrepreneurship within entrepreneurship, the context of a more giant corporation.
Large companies have restructured themselves to be more innovative after realizing their weaknesses in specific performance areas. We consider fostering entrepreneurship to be a crucial objective for American society. Due to expanding markets, infrastructure investments, and mounting debt, the US enjoyed unprecedented opportunities over the first 30 years following World War II.
Business success is no longer easy to achieve in today’s competitive environment. Government regulation, overseas competition, and technological change have made access to international resources more difficult and ended American dominance in some industries. Entrepreneurship is an approach to management that offers the benefits of rapid response to changes and innovative contributions to the environment.
Defining Entrepreneurship and Innovation:
Entrepreneurship is increasingly gaining attention, but it’s not yet been clearly defined.
Scholars have historically divided entrepreneurship into two categories: economic function and individual traits. Economic function focuses on the entrepreneurial activity as a means of generating new business opportunities and creating wealth, while individual traits emphasize the traits of entrepreneurs such as risk-taking and innovation.
The entrepreneurial approach argues that it entails combining the factors of production and taking on risk by buying and selling at different prices. In 1911, Joseph Schumpeter expanded the definition of entrepreneurship to also include innovation. Schumpeter acknowledged the importance of entrepreneurs in cost-cutting measures discontinuity and promoted a variety of innovation types, spanning process, industry, consumer, component, and innovation.
Researchers have studied both the economic function and personal characteristics of entrepreneurs. There has been a lot of effort put into understanding the psychological and sociological sources of entrepreneurship. Studies have found common traits among entrepreneurs, such as a need for achievement, how they perceive the control center, and how inclined they are to take risks. Studies on entrepreneurs have produced a range of results, albeit they are often inconsistent and generally inconclusive. Many people claim that a common thread among businessmen is early teenage experiences and stressors.
We disagree with the approach of viewing entrepreneurship as synonymous with either bearing risk or innovation, as there are many other components involved in founding a company. Thomas Watson and Ray Kroc, who were the founders of IBM and McDonald’s, respectively, would not qualify as entrepreneurs if one has to be a founder to be an entrepreneur, yet they are still considered entrepreneurs. While putting on risk is an integral part of becoming an entrepreneur, many people try to convince them to do so initially. The “supply side” school of entrepreneurship raises questions about the necessity or sufficiency of psychological and social traits for successful entrepreneurship.
Attempts to identify a single psychological profile of entrepreneurs are doomed to fail as there are numerous counterexamples that disprove the theory. While different personality traits and behavior patterns can be associated with successful entrepreneurs, there is no one psychological model that effectively teaches or encourages entrepreneurship.
Entrepreneurship and innovation as a Behavioral Phenomenon:
It is not helpful to try to define which economic functions are entrepreneurial or describe traits that make certain individuals entrepreneurs. Entrepreneurship is an approach to management that involves pursuing opportunities without regard for existing resources.
Six essential elements, including risk, ambition, motivation, resource management, creativity, and communications, can be utilized to better our understanding of entrepreneurial behavior. The success of businessmen is based largely on how people launch and run their firms. Commitment to Opportunity, Control of Resources, Elements Of organization, and compensation in all instances of strategy implementation.
By analyzing the range between two extremes, one of which is the “promoter,” who is confident in their capability to take advantage of any chance that has arisen, irrespective of their means, we will define behavioral dimensions. A promoter, who emphasizes growth and innovation a trustee, who prioritizes the effective use of existing resources, as well as and enterprising and bureaucratic behavior lies between the two all types of managerial behavior. The spectrum of possible management methods includes a variety of behavior defined as entrepreneurial administration.
This chapter focuses on important business ideas, compares entrepreneurial and administrative behavior, and looks at the factors that drive people and organizations to act in a specific manner.
Strategic Orientation – Perspective on Entrepreneurship
An invitation advocate only utilizes their perception of opportunities inside the environment to shape the strategy, without being constrained with resources. Strategic orientation is a business factor that drives the formulation of strategy. A leader focuses on the people they lead, while a trustee focuses on the resources they control.
The administrator’s approach to examining the environment involves looking for opportunities while being mindful of the resources they control. Based on the resources at their fingertips, they would trim their chance tree. Instead of trying to escape my position and momentum, I will focus on seeking opportunities and collecting the resources I have to pursue those.
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The entrepreneur is defined as a creative and innovative person who can find new opportunities in old ideas and traditional approaches. Firms are often driven to seek opportunities that use their existing resources and may become more resource-driven over time.
By merely adding new options to current products, it is no longer viable to succeed so because old chance sources have largely been depleted.
- Technology simultaneously creates and alleviates new opportunities.
- Consumer economics affects factors like income, preferences, and the availability of credit, which affects a consumer’s ability and willingness to pay for new products and services.
- Social values are conventions and ways of living that people develop and accept during history.
- Government influences competition through deregulation, rules governing product safety, and guidelines.
- Managers have a responsibility to ensure the responsible and efficient use of people, technology, plant, and financial resources once acquired.
- Because it relies on corporate goals and what counts as a penalty, there is no real answer to this question. Broadly speaking, executives are more likely to be fired for turning up an opportunity than for failure to meet return on investment objectives, however, this varies from business to business. Sales growth and efficiency are typically considered success factors.
- Opportunities come and go during planning cycles, which may be three or five years in length.
Commitment to Opportunity – Perspective on Entrepreneurship
It is insufficient to describe a businessman as creative or innovative – it’s important to move beyond recognizing opportunities and take action to pursue them.
A promoter is a person who acts quickly to pursue an opportunity. They are able to commit to revolutionary action in a hurry and may be more or less successful. Trustees are committed for a long duration and can often seem to move slowly or be stationary once they have made their commitment.
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Entrepreneurs who are successful don’t just take risks – they also have knowledge of their field in order to maximize their chances of success. Experts have the ability to recognize patterns, enabled by their familiarity with the field, and use that to act quickly on developing patterns.
- Action orientation helps firms secure access to customers, employees, and financial resources.
- High costs of late entry lead to short decision windows.
- Risk management involves strategically managing revenues to ensure successful long-term financial stability.
- A limited decision constituency is when a person or group has fewer responsibilities and more flexibility when making decisions.
- Multiple decision constituencies require a longer and more complicated decision process.
- Reduced risk entails studying and analyzing to reduce risk, which can slow down judgment.
- Negotiate in order to reach a consensus and decide on an evolutionary shift instead of a radical one.
- To maintain the continuity and participation of current players, only projects that fit with existing company resources should be authorized.
The commitment of Resources – Perspective on Entrepreneurship
Good entrepreneurs commit resources in stages, starting at a minimum and increasing as the opportunity grows. They are committed but flexible at each decision point. The trustee committed to bootstrapping the project and heavily investing resources at the front end.
The entrepreneur must evaluate the resources needed to pursue an opportunity, balance the potential return against the resources committed, and try to maximize wealth creation by utilizing the least amount of resources feasible while taking on more risk. While trustee management necessitates careful thought and a substantial investment of funds after a decision to act, entrepreneurial management involves taking chances in order to explore novel ideas. Both require learning how to get more accomplished with less.
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- Although the traditional image of an entrepreneur is associated with ambiguity and a lack of commitment, this characteristic can be beneficial in times of rapid change because it allows business owners to react quickly to the altering market.
- Lack of predictable resource needs: forces company owners to invest significantly smaller expenditures in order to be more ready later on if needed.
- Organizations need to ensure that their commitment to long-term control of resources matches the level of exposure they have to them. If external forces, such as politics and technology, could potentially reduce their control over resources, they should also reduce their exposure to them.
- By making an inter-commitment to resources, we can more effectively allocate resources to meet our needs and also get closer to E.F. Schumacher’s dictum of “small is beautiful.”
- International demands that the United States utilize no more resources than its fair share, including the 35% of the global oil it used in the early 1970s.
- Having extra resources available helps to reduce an individual’s risk.
- Incentive compensation systems aim to increase short-term returns and reduce the amount of cash and profits drained over time, often through the use of excess resources.
- Managerial turnover creates pressure to achieve short-term, visible successes in order to maintain cash and profit gains.
- Asset allocation systems are often designed with the assumption that a single choice point is suitable for one-time decision-making.
- Managers try to avoid delays and bureaucratic processes by allocating maximum resources upfront when a project begins.
Management Structure – Perspective on Entrepreneurship
The promoter wants direct contact with all actors for progress updates, while the trustee seeks a more formal relationship and structure with specific rights and responsibilities. In order to rent and use resources, an informal information network must be developed instead of relying on traditional hierarchies created by ownership or employment. Informal networks are formed when the key elements for success cannot be found within the formal organization.
Many people have suggested that it is difficult to be a successful entrepreneur and manager at the same time, as they are two distinct roles with different skill sets. Entrepreneurs must possess management skills, but the tools they use to manage may differ from traditional methods.
Have a nice day 🙂
Samiullah Hundal
More to know: Start a Small Business
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