!Week5:Entrepreneurship,Creativity+AdjustmentDrChristopherPokarier|EB202IntroductiontoBusiness

‘Entrepreneurship’concept

Whatis`entrepreneurship’？

! Anumberofdefinitionsanddescriptions

! Typicallyfocusesondecisionmakingunderuncertaintyandtherisk,insightandcreativityinvolved

! Severaldistinctschoolsofthoughtonentrepreneurship…

!Entrepreneurship

Entrepreneurshipasrisk-taking

! Risk-takingisasignificantfactorwhichdifferentiatesbeinginbusinesstobeingemployed.

! Inbusiness,costscomebeforerevenues

! Theownersofabusinessaretheresidualclaimantstoanyresidualsurplus(profits)afterallcostsaremetandrevenuesreceived.

! Marketforcescanbecompelrisktakingandrewarditwell–promotinginnovationandeconomicdynamism

! FrankKnightstudiedentrepreneurshipfromariskperspective

BUTmoderncapitalismsharesrisk

! Financialmarketspriceanddistributerisk–makingentrepreneurshipmucheasier

! Issuingsharesraisescapital(likebankloans)butsharesriskwithothers

! Thiscanreducethepersonalfinancialrisksforentrepreneurs

! Weneedtounderstandentrepreneurshipthenasmorethanjustfinancialrisk-taking

! Althoughmanybusinesspeoplestillbearrisks(eg.toreputation)evenifthefinancialrisksareshared

Entrepreneurshipasinnovation

! JosephSchumpeterwasaleadingAustrianeconomistwhofirmlyestablishedacademicinterestinentrepreneurship

! Hefocusedontheeconomicconsequencesofentrepreneurship,especiallyinnovation&sawinnovation(intechnologies,products,processes,production,marketingetc)asdisturbingmarkets–causingmarketdisequilibrium

! Creativedestructionconcept-influentialinlate1990sJapan

! Schumpeteralsolookedatthesocialfoundationsofentrepreneurship

Entrepreneurshipasarbitrage

! Thisviewseesentrepreneursasidentifyingandtakingadvantageofmarketimperfections

! Eg.Anentrepreneurmightbuyacommodityorproductinonelocationandsellitinanotherataprofitowingtopriceorexchangedifferentials

! Arbitrageinitspurestform,involvingsimultaneousbuyandsellcontracts,isactuallyriskfreeandtakesadvantageofthosepricedifferentials(butclearlyisentrepreneurial)

! Thisentrepreneurshipbringsmarketsclosertoequilibrium

! ArbitrageviewassociatedwithLeibenstein,Kirzner

!EntrepreneurshipasdiscoveryKirznerdescribes‘entrepreneurialalertness’toprofitopportunitiesinimperfectmarkets

MarkCasson’sapproach

! CassonisaleadingBritishscholarofentrepreneurship

! Focusesondecisionmakingunderuncertainty-judgementaldecisionmaking

! Considersseniormanagementandnotjustowner-foundersofbusinesses

! ThisfitsthesignificantroleofleadingmanagementinrestructuringWesternfirmsfromthetopdowninthe1980s&1990s

‘Intrapreneurship’

! ‘intrapreneurship’isamorerecentpopulartermtodescriberisk-takingandinnovationinsideacompany

! Thatis,itcoversentrepreneurshipbyemployees

! ItisoftenappliedtoJapanesefirms–wheremuchinnovationhascomefrommiddleandlowerranksofthecompanyratherthanfromtopmanagementorowners

!MarketnichestrategyExpertise&sufficientdemandcanmakenarrowspecializationasuccess

Successfulentrepreneurs

! Eitherhadahungersuccessandtried(andoftenfailed)atmanyventures

! ORhaddeepexperience(andlovefor)aparticularindustryoractivity

! Eg.LonelyPlanetpublicationscreatedbyacouple(TheWheelers)wholovedtravel

! Billabongcreatedbysurfers

! BurtonSnowboardscreatedbyJimBurton–wholovesriding

!Networks&entrepreneurshipDeep&broadinteractionbringideas,expertise,financeandefforttogether

SociologyofEntrepreneurship

Whendoentrepreneursemerge?

! insocialcontextsthatsupportrisk-taking,failure,socialmobility,andbusinessingeneral

! Sometimeswhenpeoplehavesupportingsocialnetworks–eg.Oldschoolconnectionsetc–reducingrisk

! Sometimeswhenpeoplehavelittleotheroption–afterwar,migrantswhocan’thaveregularcareers,orgroupswhoareprejudicedagains

! Eg.JewsinEurope,ChineseinSoutheastAsia,QuakersinEngland

!CreativityInmatureeconomies&industriesinnovation+designarevitalforsuccess

Creativityinmodernbusiness

! creativity+innovation+designadvantagesarevital

! Oldindustrialcommand&controlmanagementstyleisconflictwithsuchneeds

! Organisationsbecome‘flatter’–less‘top-down’

! Moreoutsourcing,freeagents,freecontractingbetweenboutiquespecialistfirms

! Somenations,cities,regions,mayhaveculturaladvantages

!AdjustmentCompetition,technologicalchange,&systemicshockscreatelosers+winners

CreativeDestruction

! Entrepreneurshipcreatesnewbusinessesandbringsnewvaluetocustomers&society

! Butthissuccesscanmakeotherindustrieslesscompetitive(eg.exportsuccesscausesarisingcurrencyandrisingdomesticlabourcosts)

! Internationalcompetitioncompoundstheimpactson‘thelosers’ofmarketcompetition

! Socialandpoliticalchallengetosupportthevictimsofeconomicadjustment

!TheSILLYcanSUCCEEDIfthemarketwantsit..EastBarinStockholm

NewMoney&Bling

! Somewillquestionthetasteandmoralityofthenewwealthy

!MoralcritiquesofcommerceSavonarola(1452-1498)decriedmaterialisticimmorality&gotburntforitinFlorence

!SuccessfulentrepreneursCreatedemandforotherservices(suchasyachtingsupplies!)

FearNotFailure

! Ifyoucan’taffordthecruiseryoucanstillfishofftherocks

! TherearemanymaterialrewardsforcommercialsuccessBUT

! Manyentrepreneurscontinuetolivesimplyandtoworkhard

! &failuresareoftenhappy!

!PhilanthropyCopenhagenOperaHouse,mostlyfundedbyMrMoller,ownerofMaerskshipping

!‘entrepreneurial’outsidebusinessInpolitics,charities,orperhapsin‘catching’anentrepreneurformarriage…!