THEORIES OF ENTREPRENEURSHIP: THE END OF THE HEROIC ENTREPRENEUR

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THEORIES OF ENTREPRENEURSHIP THE END OF THE
HEROIC ENTREPRENEUR

• JEAN CLARKE
• LEEDS UNIVERSITY BUSINESS SCHOOL

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AIMS OF THE LECTURE

• To discuss your views on entrepreneurship
• To examine entrepreneurship in the UK
• To consider some ideas about entrepreneurship
• To show the importance of moving from thinking
  about entrepreneurship as just single individuals
• To understand entrepreneurship as a process
• To engage in practical activities around
  entrepreneurship

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VIEWS ON ENTREPRENEURSHIP?

• Divide into groups of five people and discuss
• Can you point to examples of entrepreneurship in
  any aspect of your life?
• What is entrepreneurship?
• How would you define an entrepreneur?
• Who would you identify as an entrepreneur?
• Draw out the differences between entrepreneurs
  and entrepreneurship

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ENTREPRENEURSHIP PERSONALITY OR PROCESS?

• Created
• Virgin music label
• Virgin Atlantic Airways
• Virgin Cola
• Virgin Mega Stores

SPECIAL PERSONALITY?
or
EFFECTIVE ACTIVITIES?

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ENTREPRENEURSHIP IN THE UK SOME BACKGROUND

• 1970s - Crisis in UK economy, large companies
  inflexible and slow. (Bolton, 1971)
• 1980s Growth of small firm sector, Enterprise
  culture
• 1990s to Now entrepreneurship growing in
  importance as a response to rapidly changing
  global economy
• Extended to health, policing and education at all
  levels - entrepreneurial child
• Governments want to find special individuals
  psychological profiling techniques (Carr and
  Beaver, 2002)

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ENTREPRENEURSHIP IN UK SOME BACKGROUND Global
Entrepreneurship Monitor (2005 )

• UK has one of the most manageable administrative
  regimes for start-up in EU - register within a
  day
• Region with the highest level of independent
  start-ups is London (8.3 of adult population),
  lowest is the North East
• Business Angel activity is highest in London
  South East
• London has a substantially higher proportion of
  the regional population expecting to start a
  business over the next 3 years (14.9)
• Respondents in South East are most positive about
  start-up opportunities 46.5

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TOTAL ENTREPRENEURIAL ACTIVITY BY GENDER
Source Global Entrepreneurship Monitor 2005
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ENTREPRENEURSHIP IN THE UK SOME CHALLENGES

• Encourage more enterprise in disadvantaged
  communities and under-represented groups
• Improve access to finance and support
• Make available suitable Education and training
  for entrepreneurship
• N.B. Movement away from entrepreneurship as
  special individual - entrepreneurship as
  Process
• Limits development of entrepreneurs as
  entrepreneurs are seen as born not made

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ECONOMIC VIEW OF ENTREPRENEUR

• To understand why there is a focus on
  personality rather than skills look at history
  of entrepreneurship theory
• nobody can hope to understand the economic
  phenomenon of anyepoch who has not adequate
  command of the historical facts (Schumpeter,
  1934 36)
• French tradition - the Physiocrats Cantillon
  (1755)
• Foresight to assume uncertainty
• Reacts to profit opportunities
• Bears uncertainty
• Brings about a balance between supplies demands

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ECONOMIC VIEW OF ENTREPRENEUR

• The Modern Austrian Tradition Main
  representative Kirzner (1973)
• The entrepreneur as a coordinating agent who is
  capable of exploiting unnoticed opportunities due
  to his/her special alertness.
• Has knowledge not available to everybody which
  leads to creative discoveries
• Facilitates exchange between suppliers and
  customers
• Profit as reward for recognising a market
  opportunity acting as middleman

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ECONOMIC VIEW OF ENTREPRENEURS

• Schumpeter (1934)
• Entrepreneur as innovator, creator and catalyst
  for change
• Only certain extraordinary people have the
  ability to be entrepreneurs and they bring about
  extraordinary events
• Brings about change through introduction of new
  technological process/product
• About dream/vision and impulse to fight
• Creative destruction of existing combinations of
  resources

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THE ECONOMIC ENTREPRENEUR A SPECIAL INDIVIDUAL

• Various Epochs and traditions have contradicted
  and criticised one another
• At odds with economic principles which tend to be
  able to predict, repeat analysis backed up by
  natural scientific laws
• Theories are specific to the context in which
  they are created
• However, at one point they all agree the focus on
  the entrepreneur as special individual (Chell,
  1991)

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PSYCHOLOGICAL PROFILING OF ENTREPRENEUR

• THE TRAIT APPROACH
• Need for Achievement
• Locus of Control
• Risk-taking
• Innovation and creativity
• General Personality Scales 16PF, The Big Five
• CONSTRUCTION OF THE TRAIT APPROACH
• Biased towards Western culture
• Gender-biased,
• Ethnocentric (Chell, 2001)

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PSYCHOLOGICAL PROFILING OF ENTREPRENEUR

• PSYCHOANALYTIC APPROACHES
• Conflicts, difficulties or losses in childhood,
  motivates entrepreneurs to succeed
• In particular absent father, poverty, illness
  etc
• To think about developing entrepreneurship in
  this way brings ethical questions to the fore
• Criticised for only describing extremes and not
  accounting for the majority of entrepreneurs
• Variety of reasons behind set-up e.g. life-style
  choice, fulfilling dream, loss of long-term
  employment etc. (Chell, 1991)

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PSYCHOLOGICAL PROFILING OF ENTREPRENEUR

• COGNITIVE STUDIES
• Propose to focus on the behaviours of
  entrepreneurs rather than their personalities
• Entrepreneurs have certain heuristics, schemas
  that allow him/her to examine the environment and
  find existing opportunities (Mitchell, 2002)
• However, now focus on special thinking
• Still focuses on entrepreneur as having special
  abilities rather than focusing on the process of
  entrepreneurship
• Impossible to develop such schemas need a
  different approach

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ENTREPRENEURSHIP AS ACTION A DIFFERENT APPROACH

• Psych studies treat entrepreneur as disconnected
  from context
• Individuals not distinct from their activities -
  they are part of and create the systems within
  which they are situated
• Focus on what the entrepreneur does, not who
  the entrepreneur is (Gartner, 1988)
• This view leaves open the possibility of
  developing entrepreneurship in individuals
• Entrepreneurs made not born (Chell, 2001)

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ENTREPRENEURSHIP AS ACTION

• As a process, not an attribute of a person
  (Stevenson and Jarillo, 1990)
• An individual is not always entrepreneurial, may
  be team-effort
• Necessity vs. opportunity entrepreneurship
• Innovations as a response to the need for making
  un-programmed decisions
• Transcends the limits imposed by the owner
  manager
• Possible at any stage of the life cycle of a
  business enterprise (Handy, 2004)

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THE ENTREPRENEURIAL PROCESS 9 KEY ACTIVITIES
9. Financial, Social capital
1.Motivation to make a difference
2. Spotting opportunities
4.Dealing with Obstacles
8. Controlling the business
7. Using Networks extensively
3. Finding The resources required
5.Showing Determination in the face of adversity
6.Managing risk
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THE ENTREPRENEURIAL PROCESS

• Responding to opportunities in context
• Finding out about your market
• Planning effectively
• Finding the resources required
• Using networks
• Managing risk
• Financial and social capital
• Managing the business effectively

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GROUP TASK ENTREPRENEURIAL CASES

• Teams of 5 individuals
• Discuss the cases which have been set in front of
  you
• Discuss how you could see the cases as both
  individual personality trait or rather necessity
  ordinary people who have been put into
  extraordinary situations
• E.g. Others in context
• E.g. Necessity of situation
• Second partlist the processes that these
  individuals went through to make sure their
  venture succeeded.