MBA 6262: High Tech Entrepreneurship

1
MBA 6262 High Tech Entrepreneurship
University of OttawaSchool of Management

• Margaret Dalziel, Ph.D.
• University of Ottawa
• dalziel_at_management.uottawa.ca

2
Session 1 Agenda

• Introduction
• Course overview
• Lecture discussion
• What is entrepreneurship?
• Entrepreneurship and economics
• High-growth enterprises
• Break
• Paper on selected Canadian entrepreneur
• Excel file
• Where to find an entrepreneur

3
An entrepreneur

• The word Entrepreneur comes from French. It
  literally comes from the words "Entre" meaning
  "in between" and "preneur" meaning "jobs". So
  its not surprising many Entrepreneurs get their
  start after being fired from previous jobs.
• (www.valleyofthegeeks.com, 2002)

4
Origins

• First English usage
• That most noble centoure Publius Decius, so
  hardie an entreprennoure in the bataile. (1475)
• First French usage with similar sense
• Voilà pourquoi notre gouvernement le
  gouvernement américan () encourage les
  compagnies qui entreprennent la construction des
  ponts, louverture des routes et des canaux.
  (1801)

5
Origins, continued

• First French usage with same sense
• Cest lagriculteur, le manufacturier, le
  commerçant, ou, pour les désigner par une
  dénomination commune à tous les trois, cest
  lentrepreneur dindustrie, celui qui entreprend
  de créer pour son compte, à son profit et à ses
  risques, un produit quelconque. (1841)

6
Schumpeter(1911 in German, 1934 in English)

• Development in our sense is then defined by
  carrying out of new combinations. This concept
  covers the following five cases
• The introduction of a new good that is one with
  which consumers are not yet familiar or of a
  new quality of a good.
• The introduction of a new method of production,
  that is one not yet tested by experience in the
  branch of manufacture concerned, which need by no
  means be founded upon a discovery scientifically
  new, and can also exist is a new way of handling
  a commodity commercially.

7
Schumpeter, continued

• The opening of a new market, that is a market
  into which the particular branch of manufacture
  of the country in question has not previously
  entered, whether or not this market has existed
  before.
• The conquest of a new source of supply of raw
  materials or half-manufactured goods, again
  irrespective of whether this source already
  exists or whether it has first to be created.
• The carrying out of the new organisation of any
  industry, like the creation of a monopoly
  position (for example through trustification) or
  the breaking up of a monopoly position.

8
Kirzner, 1973

• this Austrian approach a) sees equilibration
  as a systematic process in which market
  participants acquire more and more accurate and
  complete mutual knowledge of potential demand and
  supply attitudes, and b) sees the driving force
  behind this systematic process as
  entrepreneurial discovery.

9
Kirzner, continued

• Entrepreneurial discovery is seen as gradually
  but systematically pushing back the boundaries of
  sheer ignorance, in this way increasing mutual
  awareness among market participants and thus, in
  turn, driving prices, output and input quantities
  and qualities, toward the values consistent with
  equilibrium (seen as the complete absence of
  sheer ignorance).

10
Kirzner, last one

• An opportunity for pure profit cannot, by its
  nature, be the object of systematic search.
  Systematic search can be undertaken for a piece
  of missing information, but only because the
  searcher is aware of the nature of what he does
  not know, and is aware with greater or lesser
  certainty of the way to find out the missing
  information. In the economics of search
  literature, therefore, search is correctly
  treated as any other deliberate process of
  production. But it is in the nature of an
  overlooked profit opportunity that it has been
  utterly overlooked, i.e. that one is not aware at
  all that one has missed the grasping of any
  profit.

11
Promising Startups Pursue Ambiguous
Opportunities Source Bhidé, 2000
Promising Startups
Marginal Startups
12
Expected Growth Uncertainty
Growth Low Uncertainty
Growth High Uncertainty
Decline Low Uncertainty
Decline High Uncertainty
13
Profitability

• For highest likely profitability we want
  increasing mean
• For highest possible profitability we want high
  variance

14
Uncertainty

• Knight (1921) distinguished between risk (known
  probabilities) and uncertainty (unknown
  probabilities)
• Kirzner (1973) distinguishes between sheer
  ignorance (element of surprise) and imperfect
  information (known but missing)
• Bhidé (2000) distinguishes between uncertainty
  (known choices) and ambiguity (unknown choices)

15
Sources of Uncertainty

• Technological
• Can the technical milestones be achieved?
• Can they be achieved with the timeframe and
  budget?
• Does the product/service adhere to the dominant
  design?
• Are the complementary technologies/systems in
  place?
• Patent protection/infringement

16
Sources of Uncertainty (cont)

• Market
• Customer acceptance of product/service
• Size and rate of growth of market
• What are the sales channels?
• Organizational
• Does our firm have the required business
  capabilities?
• Can we manage partners with complementary
  capabilities?
• Do we have sufficient capital?

17
Promising Startups vs Large Corporations
Promising Startups
Corporate Initiatives

• Lack of novel ideas and capital
• Low investment, high uncertainty
• Extensive adaptation, limited planning
• Risk transferred to resource providers
• Entrepreneurs personal abilities

• Ample capital, extensive checks and balances
• High investment, low uncertainty
• Extensive planning, limited adaptation
• Firm underwrites risk
• Joint effort

Endowments and constraints Nature of
opportunities Reliance on adaptation Securing
resources Differentiating factors
18
Uncertainty Investment ProfitSource Bhidé,
2000
Likely Profit
Revolutionary Ventures
Promising Startups
VC-Backed Startups
Irreducible Uncertainty
Corporate Initiatives
Marginal Businesses
Investment
19
Study of Successful Canadian Entrepreneurs

• Select a Canadian entrepreneur
• Lives and works in Canada
• Firm was founded in Canada and operates here or
  formerly operated here
• The example of entrepreneurship is
• High growth On Profit100 or better
• Deserving You want it to succeed
• Interesting You want to learn about it
• Important You think we should know about it
• Find one here
• www.profitguide.com/profit100/
• www.canadianbusiness.com/