Lec 3

• Entrepreneurship


  The process of creating or seizing an opportunity, and pursuing it regardless of the resources currently controlled
• Importance of entrepreneurship


  • Provide products and services to society (customers) that will add value and enhance quality of life
  • Evolved into big organizations that create great impact on society in terms of products, employment opportunities and other economic multiplier effects
• Importance of entrepreneurship (cont.)

  • A society with great entrepreneurial culture is more productive, competitive and prosperous
  • Entrepreneurs mobilize effective and efficient production technology, increase labour productivity and produce higher quality, cheaper and better service output to serve customer needs
  • Allocate and use capital, resources and labour productively and efficiently
• Former socialist countries like Eastern Europe and centrally planned economies find it difficult to cultivate entrepreneurial culture
• The People's Republic of China created a dual system where entrepreneurial activities are allowed and encouraged in special economic zones, acknowledging the role of entrepreneurs in creating wealth
• Importance of entrepreneurship (cont.)

  • A healthy entrepreneurial culture will grow in a political, legal and economic environment that encourage entrepreneurial activities
  • These are enablers that provide avenues for individuals and organizations to progress and move up the social and economic ladder
  • The whole process helps to create wealth and prosperity to a nation
• A nation whose citizens are entrepreneurial and industrious will be more successful economically as they will be good at identifying and capturing business opportunities within their countries and globally
• Sociocultural factors


  Culture and society
• Entrepreneurship is a culturally embedded phenomenon
• Sociocultural environment


  The beliefs and attitudes of the members of society to what are desirable and legitimate activities
• Entrepreneurship will thrive in a society where entrepreneurs are highly appreciated and viewed as cultural heroes
• Entrepreneurship will not prosper if most members of the society view it with suspicion, as an individual's behaviour is largely influenced by what others think, especially when faced with ambiguities and uncertainties
• Role theory

  Emphasizes the influence of role models on entrepreneurial behaviour
• The presence of successful entrepreneurs will encourage others, as their presence will convey a message that entrepreneurship is an attractive and viable career option
• Family and close friends may also serve as role models for aspiring entrepreneurs
• The desire to start a business can be significantly influenced by parental role models and/or exposure to entrepreneurial activities at a younger age
• Having a close self-employed relative is one of the core antecedents of entrepreneurship
• Entrepreneurs often came from families where the mothers or fathers were themselves entrepreneurs
• The existence of a successful role model encourages entrepreneurial efforts, and it would be very difficult to encourage people to become entrepreneurs when they see no or few examples of others who have been successful entrepreneurs
• Cultural system


  Formed and influenced by the collective values of individuals within a society
• An individual's inclination towards entrepreneurial activities is largely influenced by his/her cultural values and beliefs such as asceticism, deferred gratification, frugality, and thrift</b>
• Values associated with power distance, collectivism, femininity and uncertainty avoidance have been identified as having detrimental effects to a society's entrepreneurial development
• Cultural beliefs that support innovation, risk-taking and autonomy are found to have positive influences on a society's entrepreneurial pursuits
• Entrepreneurship thrives where values such as wealth generation, personal gain, acceptance of change and economic advancement are prevalent
• Networking


  An important prerequisite for starting a successful new venture
• As a consequence of their newness and smallness, new ventures lack capability and legitimacy to acquire resources through the traditional market mechanism, and rely on their networking ties to provide both resources and opportunities for their survival and success
• Network success hypothesis


  Business founders will be better able to gain access to resources more cheaply through their network ties than through the normal market channels, and their network ties will also give them access to resources that would not otherwise be available through normal market operations such as reputation and customer contacts
• Theory of social embeddedness


  All economic activity is embedded in social relations and that relationship can accordingly influence how a business is established and the way it is run
• Arm's length relationship


  Typical market transaction without personal attachment between the transaction partners
• Embedded ties


  Based on more personal relationships and generally governed by informal market mechanisms such as trust
• Governmental influence


  The use of public policy at different levels of government to promote entrepreneurship activities
• There is a growing interest in the use of public policy to promote entrepreneurship activities around the world
• Scholars tend to agree on the important role of the government in facilitating and providing a conducive environment for the growth of entrepreneurs and their enterprises, but there is less agreement on the effective level of government influences
• Free market model


  Emphasizes minimal government influence to reduce barriers of entrepreneurship and to open up new business opportunities
• Guided entrepreneurship model


  Public policy is used as a tool to create a supportive environment for the entrepreneurs
• Social democratic model


  Government encourages enterprise development but with social protection