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What do we know about
entrepreneurship and
commercialization? 4 March 2015
Hans Landström
SKJ Centre for Entrepreneurship
Lund University, Sweden
Different knowledge focus (Stevenson & Jarillo, 1990)
◙ What happens on the market when the
entrepreneur acts? – the market
◙ Who is the entrepreneur? and Why do they act?
– the individual
◙ How is entrepreneurship developed? – the
process
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Three eras of
entrepreneurship research
1870-1940 1940-1970 1970 -
Economics Era Social Science Management
- Knightian view Era Studies Era - Schumpeterian view - Historical/
- Kirznerian (Austrian) view sociologist view
- Psychologist/
sociologist view
1870 1900 1950 2000
Schumpeterian tradition
1st edition 1912, 2nd edition 1926, English edition 1934 (based on 2nd edition), but the 1st and 2nd editions are different.
Chapter 2 ”The fundamental phenomenon of economic development” 1. The basic assumption was that economic growth resulted from, not only labor and capital, but innovations or ”new combinations”. 2. Innovations in the form of new products, new production methods, new raw material, new markets, and new organizational structure in industry. 3. Pioneers and ”swarms” of entrepreneurs.
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Schumpeter Mark I and Mark II
The Theory of Economic Capital, Socialism and
Development (1934; 1912) Democracy (1942) Industry Less concentrated markets. More oligopolistic and characteristics monopolistic markets. Low entry barriers. High entry barriers. Large number of small firms Economies of scale. Similarities Innovations are central to economic development.
Entrepreneurship is a function that is delimited in time. The capitalist assumes the risk.
Differences Focus on the individual. Focus on the function. Only ”first degree” A lower requirement on innovations are counted. innovation level.
Kirznerian tradition
The entrepreneurial function involves: (a) the coordination of information, which is based on identifying the gap between supply and demand, and (b) acting as the broker between supply and demand, making it possible to earn money from the difference.
Thus, the entrepreneur tries to discover profit opportunities (entrepreneurial alertness) and helps to restore equilibrium on the market by acting on these opportunities.
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How is entrepreneurship defined –
economics view?
What happens on the market when the entrepreneur
acts? – a market focus Schumpeterian definition (1934)
The entrepreneur is an innovator introducing new combinations
of resources, creating a disequilibrium on the market.
Prod A
Schumpeter
Kirzner
Prod B
Kirznerian definition (1973)
Entrepreneurs are alert to identify and act upon profit-making
opportunities based on an identification of the gap between supply and
demand.
From economic to social science …
Around the Second World War …
The economic science focused more and more strongly on
equilibrium models and models in economics became increasingly
mathematic oriented.
Baumol (1968) made clear that within the framework of market
equilibrium, there was no room for the entrepreneurial function.
Entrepreneurship and economics have never been good ’travelling
companions’.
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Three eras of
entrepreneurship research
1870-1940 1940-1970 1970 -
Economics Era Social Science Management
- Knightian view Era Studies Era - Schumpeterian view - Historical/
- Kirznerian (Austrian) view sociologist view
- Psychologist/
sociologist view
1870 1900 1950 2000
David McClelland:
The Achieving Society (1961)
Research question: Why do certain societies develop more dynamically than others? Hypothesis: The values that prevail in a given society, particularly with regard to the need for achievement (nACH), are of vital importance for the economic development of the society. Result: Economically better developed nations are characterized by lower focus on institutional norms, and greater focus on openness towards other people and a higher nACH in society. Entrepreneur: Major driving force in the development – transform a country’s level of achievement to economic growth. Characteristics: nACH, moderate risk taker, self-confidence, individual problem solving, etc.
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Socio-demographical characteristics
Parents’ occupation
Education
Experience (industry experience and start-up experience)
Gender and age
Situation in life (windows of opportunities)
Alternative possibilities (revenues)
Ethnicity
Individual traits
Needs for achievement (nACH)
Acceptance of risk and uncertainty
Internal locus of control and self efficacy
Seeking for independence
Creativity and initiative power
Over-optimistic and future orientation
Determination and persistence
Action orientation
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How is entrepreneurship defined –
behavioural sciences view?
Who is the entrepreneur? and Why do they act? – a individual focus
The ‘great person’ definition The entrepreneur has an intuitive ability – a sixth sense and inborn traits and instincts.
Psychological trait definition The entrepreneur is driven by some unique values, attitudes, needs and
traits (e.g. nACH, LOC, creativity, persistence, etc.).
Leadership definition Entrepreneurs are leaders of people: entrepreneurs have the ability to
adapt their style to the need of the people.
Three eras of
entrepreneurship research
1870-1940 1940-1970 1970 -
Economics Era Social Science Management
- Knightian view Era Studies Era - Schumpeterian view - Historical/
- Kirznerian (Austrian) view sociologist view
- Psychologist/
sociologist view
1870 1900 1950 2000
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The environment during
the 1950s and 1960s
Schumpeter (1942) ”… what we have got to accept is that the large-scale establishment has come to be the most powerful engine of progress.” (p 106)
Galbraith (1967) Argued that innovative activities as well as improvements in products and processes were most effeciently carried out in the context of large corporations. Therefore, economic policy should focus on large corporations.
The 1960s and 1970s:
Decades of ”creative destruction”
Introduction of institutional
reforms, e.g. tax laws, Bayh-Dole
Act, etc.
Technological breakthroughs, e.g.
DNA, microprocessor, etc.
Globalization of the economy.
Twin oil crises (1973/1979), and
an uncertainty about large
companies possibilities to create
jobs.
Change in mentality (”small is
beautiful”).
Political support (Thatcher and
Reagan).
Changes in society
Entrepreneurship
and Small Business
Research
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David Birch:
The Job Generation Process (1979)
◘ The majority of new jobs were created with
20 or less employees – often independent
and young firms (thus, it was not the large
firms that created new jobs).
◘ The report (54 pages) was sold in twelve copies,
but its influence was enormous (among
policy-makers as well as research community).
◘ Considerable debate, but many of the findings have proved very robust
and have been verified in many later studies (Storey, Kirchhoff,
Reynolds, Davidsson).
William Gartner: Heterogeneity and behavioural orientation
Entrepreneurship as a heterogeneous phenomenon
There are many different kinds of entrepreneurs,
there are many different ways of starting a business,
many different kinds of environments, and many
kinds of start-ups. (Gartner, 1985)
Behavioural orientation in entrepreneurship research
Systematic shift from an interest in the entrepreneur
as an individual (entrepreneurial traits) to contextual
and processual aspects. (Gartner, 1988)
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The Entrepreneurial Process: Four approaches
1. Activitiy-based approach 2. Business platform approach Paul Reynolds
Magnus Klofsten
3. Causation and effectuation 4. Evolutionary approach
approach
Saras Sarasvathy
Howard Aldrich
The entrepreneurial process
Development of business idea Idea Business Business Business opportunity model plan New venture Career- Decision to start choice a new venture Development of a new venture
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Next lecture on the 18 March …
… a more detailed presentation of the entrepreneurial
process, business planning and business models.
Sankataran Venkataraman and Scott Shane: The domain of entrepreneurship
Entrepreneurship is a scholarly field that seeks
to understand how opportunities to bring into existence
”future” goods and services are discovered, created,
and exploited, by whom, and with what consequences.
(Academy of Management Review, 2000)
1. Definition discussion
2. Focus on opportunities
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How is entrepreneurship defined –
management studies view?
How is entrepreneurship developed – a process focus
Firm creation
Entrepreneurship is the creation of organizations, the process by which
new organizations come into existence (Gartner, 1988).
Opportunities Entrepreneurship investigates how and why some individuals (or teams)
identify opportunities, evaluate them as viable, and then decide
to exploit them, whereas others do not, and, in turn, how these
opportunities result in product, firm, industry and wealth creation (Brush et
al., 2003; Shane and Venkataraman, 2000).
External sources of new ideas
Sources Examples
New markets emerges
New technologies are created
Political decisions/regulations
Deregulations of systems
Changes in consumer behaviour
Sudden events
Changes in business models
Mobile phone industry (end of the
1990s)
Digital photography/functional
food
Changes within EU
Financial markets in Sweden
during the 1980s
Music industry (CD web
loading) (in the 2000s)/Health
9/11
Amazon.com
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Individual differences (Ardichivilli et al., 2001)
Education Earlier knowledge - market Experience - customers’ need BOR Individual Entrepreneurial experience alertness Work Network experience (strong vs weak ties)
Perception of successful business
ideas (Baron and Ensley, 2006)
Novice entrepreneurs (first time) Experienced entrepreneurs
How novel the idea is
Idea based on new technology
Superiority of product/service
Potential to change the industry
Intuition or ”gut feeling”
Solving a customer’s problems
Ability to generate positive cash flow
Speed of revenue generation
Manageable risk
Other in their network with whom to
develop the venture
Thus, focus on:
Newness and uniqueness of their
product or service, and ”gut feeling”
belief in its potential.
Thus, focus on:
Factors and conditions related to the
start and the running of the venture.
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Business opportunity register
1. Short description of the idea 2. Trends on which the idea are based 3. Key information (e.g. customers, technical solutions) 4. Problems that may occur in the development of the idea 5. Competition (alternative solutions) 6. Sources for more information (individuals, web-pages,
books) 7. Timing? 2-3 pages for each business opportunity
Conclusion
◙ Who is the entrepreneur? and Why do they act?
– the individual
◙ How is entrepreneurship developed? – the
process
◙ What happens on the market when the
entrepreneur acts? – the market
