Foundation of Entrepreneurial Management

Foundation of Entrepreneurial Management

• Entrepreneurial management is increasingly important as organizations and markets become more dynamic.
• Entrepreneurship is no longer confined to the private sector; it extends to corporate, government, and social domains.
• Entrepreneurship can be applied universally across various organizations like SMEs, large corporations, social ventures, and governments.
• Anyone with the right mindset, drive, and motivation can adopt an entrepreneurial perspective including identifying needs and transforming ideas into reality.
• Effective entrepreneurial management challenges existing assumptions and generates value innovatively.
• It changes business by identifying and fulfilling opportunities.
• Organizations can maintain competitiveness by championing innovative ideas and institutionalizing entrepreneurial activity.
• This chapter explores effective entrepreneurial management, its historical perspectives, and the entrepreneurial process in established organizations.
• Entrepreneurship is a framework for achieving organizational objectives.

Overview of Entrepreneurship

• Entrepreneurship has varied interpretations.
• Key questions surrounding entrepreneurship:
  • Who is an entrepreneur?
  • What is entrepreneurship?
  • What is corporate entrepreneurship?
  • What is social entrepreneurship?
  • What is the entrepreneurial process?
• The development of entrepreneurship theory has mirrored the evolution of the term itself.
• The word "entrepreneur" originates from French, meaning "between-taker" or "go-between.”

Entrepreneur and Entrepreneurship

• Marco Polo was an early example of an entrepreneur as a go-between, establishing trade routes to the Far East.
• In the Middle Ages, "entrepreneur" described actors and managers of large production projects like castles and cathedrals.
• These individuals managed projects using government-provided resources, without personal risk.
• Seventeenth-century entrepreneurs contracted with the government to supply services or products.
• John Law, a Frenchman, was allowed to establish a royal bank.
• Richard Cantillon defined entrepreneurs as risk-takers and rational decision-makers who managed firms.
• Eighteenth-century entrepreneurs were distinguished from capital providers.
• Eli Whitney's cotton gin & Thomas Edison's light bulb were invented during this time.
• In the late 19th and early 20th centuries, entrepreneurs were viewed from an economic perspective, with risk-bearing as a key factor.
• Andrew Carnegie adapted technology to achieve economic vitality in the steel industry.
• Mid-20th century defined entrepreneurs as innovators.
• Innovation, introducing something new, is critical for entrepreneurs, requiring creation, conceptualization, and environmental understanding.
• John Pierpont Morgan reorganized and financed industries, exemplifying this type of entrepreneur.
• Historically, entrepreneurship involves translating a vision into a successful business, with definitions focusing on new organizations, wealth creation, and ownership.
• Entrepreneurship is further refined through business, managerial, and personal perspectives.
• Personal entrepreneurship involves initiative, organizing resources, and accepting risk.
• From an economist's viewpoint, an entrepreneur combines resources to increase product/service value and implement change.
• Psychologically, entrepreneurs are driven by needs for attainment, experimentation, accomplishment, or autonomy.
• To business people, entrepreneurs can be threats or allies, such as suppliers, customers, or wealth creators.
• Entrepreneurial managers improve resource utilization, reduce waste, and create jobs.
• Entrepreneurship is a dynamic process of wealth creation and environmental stimulation.
• Individuals create wealth by assuming risks in equity, time, and career commitment to provide value.
• Newness of a product or service is variable but requires entrepreneurial infusion.
• While definitions vary, they share themes of newness, organizing, wealth creation, and risk-taking.
• Entrepreneurs exist in various professions like education, medicine, and government.
• All-inclusive definition: Entrepreneurship is creating something new with value, assuming financial, psychic, and social risks, and receiving monetary and personal satisfaction.

Corporate Entrepreneurship

• Corporate entrepreneurship, also known as intrapreneurship or corporate venturing, involves pursuing opportunities within organizations, independent of current resources.
• It results in new organizations or organizational renewal and innovation.
• Corporate entrepreneurship requires fostering entrepreneurial behaviors in established organizations and enabling creative application and inventing.
• It extends competence and opportunity via internally generated resource combinations.
• Organizations can foster innovation by encouraging entrepreneurial thinking and providing freedom.
• Innovation requires motivated individuals, conducive environments, and influences from both organizational and environmental characteristics.
• Companies like IBM, HP, 3M, Apple, Facebook, Microsoft, and Xerox have experienced corporate entrepreneurship success.
• Corporate entrepreneurship includes new venture creation and organizational transformation via strategic renewal.
• Renewal includes formal/informal activities that create new businesses/processes at various organizational levels.
• The aim is to improve competitive position and financial performance.
• Renewal involves redefining an organization's mission via creative resource redeployment, leading to refined product/technology combinations.
• Corporate entrepreneurship also emphasizes strategy reformulation, reorganization, and organizational change.

Public Sector Entrepreneurship

• Public sector organizations face captive demand, guaranteed financing, and distance from voters.
• Bureaucratic, conservative governments tend to have fewer entrepreneurial employees.
• Governments foster entrepreneurial thinking to respond to the global economy.
• They emphasize new public managerialism and reforms that include innovation.
• Lee Kuan Yew transformed Singapore into an independent and self-sustaining economy.
• Lee pursued aggressive foreign direct investment to attract new resources.
• Private sector organizations are affected by the changing relationships between public officials and their constituencies.
• Entrepreneurial behavior is viewed as a method to develop innovative solutions.
• Public sector entrepreneurship resembles corporate entrepreneurship, facing similar challenges in hierarchy, stakeholders, culture, and financial controls.
• Public sector and large corporation managers focus on internal developments and process over outcome, which inhibits innovation.
• Public sector entrepreneurs need to understand the political authority in policy design and implementation.
• Singapore exemplifies a 'top-down' approach to entrepreneurship, including policies, subsidies, creative thinking, and foreign recruitment.

Public Sector vs. Private Sector

• Public sector: Greater diversity and conflicting objectives.
• Public sector: Lower organizational commitment and job satisfaction.
• Public sector: Potentially lower prestige and social status.
• Public sector: Limited decision-making autonomy and increased constraints.
• Public sector: Higher concentration of authority with centralized procedures.
• Public sector: Reduced incentives.
• Public sector: Salaried managers lacking profit sharing.
• Public sector: Not profit-driven.
• Public sector: Easier access to large funding amounts.
• Public sector: Free from private enterprise restrictions.
• Public sector: No profit motive; social and political objectives.
• Public sector: Indirect funding from taxpayers.
• Public sector: Difficulty identifying stakeholders and constituencies.
• Public sector: Subject to public scrutiny.
• Public sector entrepreneurship relies on group desire over individual attributes.
• There are key differences in objectives, decision-making, authority, risk/rewards, motivation, funding, restrictions, growth, and independence.

Social Entrepreneurship

• Definitions relatively limited and diverse, unlike those for corporate entrepreneurship.
• In the last 20 years, value creation has been extended to social organizations.
• Social entrepreneurship contributes to communities and society by offering solutions to social issues.
• There's increasing interest in social entrepreneurship, evidenced by awards.
• Social entrepreneurship is defined across not-for-profits, for-profits, public sectors, and hybrid organizations.
• Social entrepreneurship includes innovative activity with social objectives in for-profit, nonprofit, and public sectors.
• Social entrepreneurship applies business expertise and market skills in all sectors to develop innovative approaches.
• It primarily creates social value, not personal or stakeholder wealth.

Comparing Entrepreneurship Types

• Entrepreneurship involves creative activity, discovery, and exploitation of opportunities.
• Entrepreneurial events require identification and addressing of opportunities.
• Entrepreneurship is characterized by pro-activeness and innovativeness.

Entrepreneur vs. Manager

• Entrepreneurship is a mode of Management
• Management involves achieving organization's goals by reducing variability and increasing stability
• Management involves accomplishing work effectively
• Management effectively means forecasting, planning, organizing, coordinating, communicating, leading, facilitating, motivating and controlling
• Management is transformation of inputs into outputs through conceptual, human and technical skills
• Managers must utilize resources to achieve optimum in line with organizational objectives

Entrepreneurial Process

• Entrepreneurial process involves problem solving
• Entrepreneurs find, evaluate and develop an opportunity by overcoming forces that resist creation of something new
• Requires recognition of processes and management
• Can occur in different settings but changes due to diversity amount private corporate, social contexts
• Process has 4 distinct phases:
  • Identification and evaluation opportunity
  • Development of business plan
  • Determine and evaluate resource requirements
  • Implementation and management of resulting enterprise
• Requires keeping in mind the desired type of business

Effective Entrepreneurial Management

• Requires a different mindset and actions often.
• Characteristics:
  • Strong drive and energy.
  • Motivation to change.
  • Desire to achieve.
  • Challenges the old ways.
  • Focuses on future opportunities.
  • Takes risks.
  • Is proactive.
  • Develops a strong team and coalition.

Key Takeaways

• This chapter has provided the foundation for entrepreneurial management.
• It discussed private, corporate, public, and social entrepreneurship, emphasizing the need for creative and innovative practices.
• It highlighted the distinctions between entrepreneurs and managers.
• Lastly, it focused on the entrepreneurial process, ending with a discussion of how to apply the knowledge in entrepreneurial management effectively.