GST 301 Entrepreneurship Studies PDF

NATIONAL UNIVERSITIES COMMISSION Contents Study session 1: Origin and Concepts of Entrepreneur and Entrepreneurship........................ 1 Introduction........................................................................................................................... 1 Learning Outcomes for module 1 study session 1................................................................. 1 1.1 Entrepreneurship – Origin............................................................................................... 1 1.2 An Overview of the Definitions of Entrepreneurship and Entrepreneur........................ 2 1.1.1 Entrepreneurship...................................................................................................... 2 1.1.2 Entrepreneur............................................................................................................. 3 1.1.3 Intrapreneurs............................................................................................................ 4 1.1.4 Technopreneur......................................................................................................... 4 1.2 Types of entrepreneur..................................................................................................... 5 1.2.1 Innovative................................................................................................................. 5 1.2.2 Imitating.................................................................................................................... 5 1.2.3 Fabian........................................................................................................................ 5 1.2.4 Drone........................................................................................................................ 5 1.3 Characteristics of Entrepreneurship and Entrepreneurs................................................ 5 1.4. Roles of Entrepreneurs................................................................................................... 8 Summary of module 1 study session 1................................................................................ 10 Self-Assessment Questions for module 1 study session 1.................................................. 11 Solution to MCQs..................................................................................................................... 12 Study session 2: Entrepreneurial Motivations, variables, creativity and innovation............. 15 Introduction......................................................................................................................... 15 Learning outcome for module 1 study session 2................................................................. 15 2.1 Entrepreneur motivations............................................................................................. 15 2.2 Motivational Influences on Entrepreneurship or Bright Side of Entrepreneurs.......... 16 2.2.1 Need for Achievement............................................................................................ 17 ENTREPRENEURSHIP STUDIES 2.2.2 Risk taking Propensity............................................................................................. 17 2.2.3 Tolerance for Ambiguity......................................................................................... 17 for Distance Learners in the Nigerian University System 2.2.4 Locus of Control...................................................................................................... 17 2.2.5 Self-efficacy............................................................................................................. 17 2.2.6 Desire for Independence........................................................................................ 17 2.2.7 Drive........................................................................................................................ 18 2.2.8 Egoistic passion....................................................................................................... 18 2.3. Non-Motivational Influences on Entrepreneurs or the Dark Side of entrepreneur..... 18 2.3.1 Opportunity Cost.................................................................................................... 18 2.3.2 Stocks of Financial Capital:..................................................................................... 18 2.3.3 Social Ties to Investors............................................................................................ 19 2.3.4 Career Experience................................................................................................... 19 2.3.5. Life-Path Circumstances......................................................................................... 19 2.3.6 Unsatisfactory Work Environment......................................................................... 19 2.3.7.Negative Displacement........................................................................................... 19 i Table of Contents Study session 1: Origin and Concepts of Entrepreneur and Entrepreneurship........................ 1 Introduction........................................................................................................................... 1 Learning Outcomes for module 1 study session 1................................................................. 1 1.1 Entrepreneurship – Origin............................................................................................... 1 1.2 An Overview of the Definitions of Entrepreneurship and Entrepreneur........................ 2 1.1.1 Entrepreneurship...................................................................................................... 2 1.1.2 Entrepreneur............................................................................................................. 3 1.1.3 Intrapreneurs............................................................................................................ 4 1.1.4 Technopreneur......................................................................................................... 4 1.2 Types of entrepreneur..................................................................................................... 5 1.2.1 Innovative................................................................................................................. 5 1.2.2 Imitating.................................................................................................................... 5 1.2.3 Fabian........................................................................................................................ 5 1.2.4 Drone........................................................................................................................ 5 1.3 Characteristics of Entrepreneurship and Entrepreneurs................................................ 5 1.4. Roles of Entrepreneurs................................................................................................... 8 Summary of module 1 study session 1................................................................................ 10 Self-Assessment Questions for module 1 study session 1.................................................. 11 Solution to MCQs..................................................................................................................... 12 Study session 2: Entrepreneurial Motivations, variables, creativity and innovation............. 15 Introduction......................................................................................................................... 15 Learning outcome for module 1 study session 2................................................................. 15 2.1 Entrepreneur motivations............................................................................................. 15 2.2 Motivational Influences on Entrepreneurship or Bright Side of Entrepreneurs.......... 16 2.2.1 Need for Achievement............................................................................................ 17 2.2.2 Risk taking Propensity............................................................................................. 17 2.2.3 Tolerance for Ambiguity......................................................................................... 17 2.2.4 Locus of Control...................................................................................................... 17 2.2.5 Self-efficacy............................................................................................................. 17 2.2.6 Desire for Independence........................................................................................ 17 2.2.7 Drive........................................................................................................................ 18 2.2.8 Egoistic passion....................................................................................................... 18 2.3. Non-Motivational Influences on Entrepreneurs or the Dark Side of entrepreneur..... 18 2.3.1 Opportunity Cost.................................................................................................... 18 2.3.2 Stocks of Financial Capital:..................................................................................... 18 2.3.3 Social Ties to Investors............................................................................................ 19 2.3.4 Career Experience................................................................................................... 19 2.3.5. Life-Path Circumstances......................................................................................... 19 2.3.6 Unsatisfactory Work Environment......................................................................... 19 2.3.7.Negative Displacement........................................................................................... 19 2.3.8 Career Transition.................................................................................................... 19 2.3.9 Positive Pull Influences........................................................................................... 19 2.3.10 Background Characteristics.................................................................................. 19 2.4 Entrepreneurship Variables........................................................................................... 20 2.4.1 The individual’s intrinsic entrepreneurial ability and intuition (Allinson, Chell & Hayes, 2000)..................................................................................................................... 20 ii 2.4.2 The general macro-economic environment........................................................... 20 2.5 Creativity........................................................................................................................ 20 2.5.1 Stages of creativity.................................................................................................. 21 2.6 Innovation and its benefits........................................................................................... 22 2.6.1 Forms of Innovations......................................................................................... 23 2.6.2 Phases in Successful Innovation............................................................................. 24 Summary of module 1 study session 2................................................................................ 26 Study session 3: Concept of Business and Business Environment......................................... 34 Introduction......................................................................................................................... 34 Learning Objectives for module 1 study session 3.............................................................. 34 3.1 An Overview of the Concept of Business....................................................................... 34 3.2 The Concept of Environment........................................................................................ 35 3.3 Components of the Business Environment – An overview........................................... 36 3.3.1 Intermediate Environmental Factors...................................................................... 37 3.4 An Overview of SWOT Analysis...................................................................................... 38 3.4.1 Strengths/Weaknesses Analysis............................................................................. 39 3.4.2 Opportunities and Threats Analysis........................................................................ 39 Summary of module 1 study session 3................................................................................ 40 Self- Assessment Questions (SAQs) for module 1 study session 3...................................... 41 Study session 4: Forms of Business Ownership and Legal Implications.............................. 45 Introduction......................................................................................................................... 45 Learning outcomes for module 1 study session 4............................................................... 45 4.1 Consideration for the choice of the form of Business organization.............................. 45 4.2 Forms of Business Ownership........................................................................................ 46 4.2.1 Sole Proprietorship................................................................................................. 47 4.2.2 Partnership.............................................................................................................. 47 4.2.3 Dissolution and Termination of a Partnership........................................................ 49 4.3 Limited Liability Companies........................................................................................... 50 4.3.1 Formation of Company and Capacity of Individual................................................ 50 4.3.2 Private liability Companies..................................................................................... 51 4.3.3 Legal Requirement for Registration of Companies................................................. 51 4.4 Co-operative.................................................................................................................. 53 4.4.1 Types of Co-operative............................................................................................. 53 Summary of module 1 study session 4................................................................................ 53 Self- Assessment Questions for module 1 study session 4 (SAQs)...................................... 54 Study session 5: Teamwork, Group Dynamic and Entrepreneurship..................................... 56 Learning Outcomes for module 1, study session 5.............................................................. 56 5.1 Team: definition and typology....................................................................................... 56 5.1.1 Typology of Teams.................................................................................................. 56 5.1.2 Team Building......................................................................................................... 57 5.1.3 Characteristics of an Effective and Efficient Team................................................. 58 5.2. Benefits of Teamwork and potential problems............................................................ 59 5.2.1 Potential Benefits of Teams.................................................................................... 59 5.2.2 Potential Problems of Teams.................................................................................. 59 5.3 Definition and theories of groups.................................................................................. 60 5.3.1 Theories of Group Formation................................................................................. 60 5.3.2 Types of Groups...................................................................................................... 60 iii 5.2.3 Advantages of group to organisation..................................................................... 61 5.2.4 Strategies in Group Development.......................................................................... 61 5.3.5 Factors affecting group performance and decision making in group.................... 62 5.3.6 Comparison between individual and group decision making................................ 62 Summary for module 1 study session 5............................................................................... 63 Self-Assessement Questions (SAQs) for module 1 study session 5..................................... 64 Study session 1: The Roles of Vision, Mission and Objectives In Entrepreneurship Development............................................................................................................................ 66 Introduction......................................................................................................................... 66 Learning outcomes for module 2 study session 1............................................................... 66 1.1 Defining vision and its components........................................................................... 66 1.1.2 Components of vision............................................................................................. 67 1.1.3 Importance of Vision and key elements that make leaders with vision succeed.. 67 1.1.4 Key elements that make a Leader with vision to succeed..................................... 68 1.1.5 Visioning Process and way of keeping vision alive................................................ 69 1.1.6 Ways of keeping Vision alive.................................................................................. 69 1.1.7 Tips to making the vision a Reality and evaluation of vision.................................. 70 1.1.8 Evaluation of vision – The following are some of the evaluation criteria:-............ 70 1.2 Mission Statement........................................................................................................ 70 1.2.1 Characteristics of Mission Statement..................................................................... 71 1.3 Organizational goals and objectives.............................................................................. 71 1.3.1 Organizational goals................................................................................................ 71 1.3.2 Organizational Objectives....................................................................................... 72 1.3.3 Importance of objectives........................................................................................ 72 1.3.4 Characteristics of good objectives.......................................................................... 72 Summary of module 2, study session 1............................................................................... 72 MODULE 2................................................................................................................................ 74 Study session 2: The Roles of Government and Business Regulatory Agencies In Nigeria..... 74 Introduction......................................................................................................................... 74 Learning outcomes for module 2 study session 2............................................................... 74 2.1 Business Regulatory/Legal Roles............................................................................... 74 2.2 Government and Business Regulatory Agencies/Bodies............................................... 75 2.2.1 The Corporate Affairs Commission......................................................................... 75 2.2.2. National Agency for Food and Drug Administration and Control (NAFDAC)........ 76 2.2.3 The Standard Council.............................................................................................. 76 2.2.4 The Independent Corrupt Practices and Other Related Offences Commission (ICPC)................................................................................................................................ 76 2.2.5 The Economic and Financial Crimes Commission (EFCC)........................................... 77 2.3 Other Regulatory Agencies....................................................................................... 79 2.4 Promotional/Supportive Roles of Government........................................................ 80 2.6. Strategic importance of SMEs.................................................................................. 82 Summary of module 2 study session 2................................................................................ 83 Self- Assessment Questions (SAQs) for study module 2 study session 2............................ 84 References........................................................................................................................... 85 Module 2, Study session 3: Writing Business Plan and Feasibility Studies............................. 86 Introduction......................................................................................................................... 86 Learning Outcomes for module 2 study session 3............................................................... 86 iv 3.1 Feasibility studies and its importance........................................................................... 86 3.1.1 Components of Feasibility Studies.......................................................................... 87 3.2 Business plan and its importance.................................................................................. 89 3.2 1 Importance of Business Plan................................................................................... 89 3.3. Principles of Planning in Feasibility Studies and Business Plan................................... 90 3.4 Components of a written plan....................................................................................... 90 Summary and conclusion for module 2 study session 3..................................................... 92 Self-Assessment Questions module 2 study session 3........................................................ 93 Study session 4 Sources of Business Finance.......................................................................... 95 Learning Outcomes for module 2 study session 4............................................................... 95 4.1 Acquisition and allocation of funds............................................................................... 95 4.2. Sources of funds for venture operation....................................................................... 96 4.2.1 The Personal and family.......................................................................................... 96 4.2.2 Internal Sources...................................................................................................... 97 4.2.3 External Sources...................................................................................................... 97 4.3. Reasons why entrepreneurs will require Loan facilities............................................. 101 Summary of module 2 study session 4.............................................................................. 101 Self-Assessment Questions for module 2 study session 4................................................ 102 Learning Outcomes for module 2 study session 5............................................................. 104 5.1 Philosophical basis of business ethics.......................................................................... 104 5.2 An Overview of Concepts in Business Ethics............................................................... 105 5.2.1 Corporate Ethics Policies...................................................................................... 106 5.3 International Business Ethics....................................................................................... 106 5.4 Importance of Business Ethics..................................................................................... 107 5.4.1 Necessity of ethics in Business and society.......................................................... 108 5.5 Ethics of economic system defined............................................................................. 108 5.5.1 Conflicting interests.............................................................................................. 108 5.5.2 Ethical issues and approaches in different economic systems............................ 109 Summary of module 2, study session 5............................................................................. 110 Self- Assessment Questions for module 2 study session 5................................................ 111 MODULE 3.............................................................................................................................. 113 Study session 1 Some Successful Nigerian Entrepreneurs.................................................. 113 Introduction....................................................................................................................... 113 Learning Outcomes for module 3 study session 1............................................................. 113 1.1 An Overview of The evolution of Contemporary Nigeria................................................ 113 1.2 Development of Entrepreneurship in Nigeria................................................................. 114 1.3 Entrepreneurship versus Social Entrepreneurship.......................................................... 115 1.4 Notable Nigerian Entrepreneurs and Social Entrepreneurs: An Overview.................... 116 1.4.1 Aliko Dangote........................................................................................................ 116 1.4.2 Chidi Anyaegbu..................................................................................................... 117 1.4.3 Chris Ejiofor........................................................................................................... 117 1.4.4 Mike Adenuga Junior............................................................................................ 117 1.4.5 Obateru Akinruntan.............................................................................................. 117 1.4.6 Paul Okafor........................................................................................................... 117 1.4.7 Poly Emenike......................................................................................................... 118 1.4.8 Razaq Okoya.......................................................................................................... 118 1.4.9 Uche Uche Ohafia................................................................................................. 118 v 1.4.10 Ada Onyejike....................................................................................................... 118 1.4.11 Cletus Olebune.................................................................................................... 118 1.4.12 Durojaiye Isaac.................................................................................................... 118 1.4.13 Gabriel Uriel Ogunjimi........................................................................................ 118 1.4.14 Joachim Ezeji...................................................................................................... 119 1.4.15 Rochas Okorocha................................................................................................ 119 1.5 The Nigerian Entrepreneur and Peculiarities of Nigerian Business Environment...... 119 Summary of module 3, study session 1............................................................................. 120 Self- Assessment Questions (SAQs) for module 3 study session 1.................................... 121 Study session 2 Economic Development through Entrepreneurship.................................... 122 Introduction....................................................................................................................... 122 Learning outcomes for module 3 study session 2............................................................. 122 2.1 Importance of Entrepreneurship in economic development.................................... 122 2.2 Entrepreneurship and Nation-Building........................................................................ 123 2.3 Roles of Entrepreneurship in economic development............................................... 124 2.4 Entrepreneurship Activity and Stages of Economic development............................. 125 2.4.1 Entrepreneurship in factor-driven economies..................................................... 125 2.4.2 Entrepreneurship in efficiency driven economies............................................... 126 2.4.3 Entrepreneurship in Innovation - driven economies............................................ 126 2.5 Entrepreneurial and functional education.................................................................. 127 2.6 Vision 20-20-20............................................................................................................ 128 Summary of module 3 study session 2.............................................................................. 130 Self-assessment Questions for module 3 study session2.................................................. 131 vi Study session 1: Origin and Concepts of Entrepreneur and Entrepreneurship Introduction In this study session, you are going to learn about the origin of entrepreneurship, the various definitions of entrepreneurship and entrepreneur. The types of entrepreneurs and their characteristics will also be covered. Understanding this unit will provide you with a basis for understanding subsequent units of these modules. Learning Outcomes for module 1 study session 1 At the end of this unit you should be able to; 1.1 Define and use correctly all the key words printed in bold (SAQs 1.1, 1.2, 1.3 and 1.4) 1.2 Discuss the origin of entrepreneurship (SAQ 1.3) 1.3 Discuss an over view of the various definitions of Entrepreneur and Entrepreneurship. (SAQ 1.1) 1.4 Differentiate between Entrepreneur and Entrepreneurship. (Provide SAQ) 1.5 State types of entrepreneurs. (Provide SAQ) 1.6 List the characteristics of a successful entrepreneur. (SAQ 1.2) 1.7 Roles of Entrepreneurs (SAQ 1.4) 1.1 Entrepreneurship – Origin Various scholars have written extensively on the origin of entrepreneurship. What is interesting is that most of the scholars who wrote about the origin of entrepreneurship are either economists or historians. Basically, the concept entrepreneur is derived from the French concept “entreprendre” which literarily is equivalent to the English concept “to undertake”. From the business point of view, to undertake simply means to start a business (QuickMBA, 2010). From the historical point of view, Schumpeter (1951) opined that the French economist Richard Cantillon, was the first to introduce the concept "entrepreneur" in his work in 1755. He viewed the entrepreneur as a risk taker (Burnett, 2000). However, some scholars contend that it was an economist, Jean-Baptiste Say, who analysed the concept in an advanced way in his work in 1821 where he identified entrepreneur as new economic phenomenon (Wikipedia, 2010). Given the foregoing, we can infer that the concept “entrepreneur” is almost as old as the formal discipline of economics itself (Schumpeter, 1951) especially given the fact that it was economists such as Adam Smith, David Ricardo, and John Stuart Mill who have written extensively on it, albeit referring to it as "business management”. However, unlike Smith and Ricardo, Mill stressed the significance of entrepreneurship for economic growth. Another renowned economist, Alfred Marshall buttressed Mill’s view by formally recognizing entrepreneurship as an important factor of production in 1890; he viewed entrepreneurship as organization creation and believed that entrepreneurship is the driving element behind organization (Schumpeter, 1951; Burnett, 2000). 1 Schumpeter (1951) contends with this view and opined that though many economics scholars agree that entrepreneurship is necessary for economic growth, they do not agree on the actual role that entrepreneurs play in generating economic growth. These debates, notwithstanding, entrepreneurship theory has kept on evolving over the years and throughout its evolution different scholars have put forward different characteristics that they believe are common among most entrepreneurs. Entrepreneurship theoretical foundations extend from economics to other disciplines such as history, politics, education, ecology, culture, experience, and networking and so on. To this effect, Schumpeter (1951) concludes that by combining the various disparate theories, a generalized set of entrepreneurship qualities can be developed. He then listed the characteristics of entrepreneurs as: risk-bearers, coordinators and organizers, gap-fillers, leaders, and innovators or creative imitators. He submits that though not exhaustive, this can help explain why some people become entrepreneurs while others do not (Burnett, 2000). o Why is entrepreneurship important according to the various scholars?  It is generally agree that entrepreneurship is important because of it create utility, increase society’s welfare, promote economic growh and development. 1.2 An Overview of the Definitions of Entrepreneurship and Entrepreneur 1.1.1 Entrepreneurship There are many definitions of the concept ‘entrepreneurship’. For instance, Putari (2006) observes that scholars had not been in agreement in their definitions of entrepreneurship and chronicled the definitions of entrepreneurship by various scholars (Brockhaus & Horwitz, 1986, Sexton & Smilor, Wortman, 1987; Gartner, 1988). Cantillon (circa 1730) views entrepreneurship as: “self employment of any sort”. In 1934, Joseph Schumpeter equated entrepreneurship with the concept of innovation and applied it to a business context, while emphasizing the combination of resources. Penrose (1963) views entrepreneurship as the activity that involves identifying opportunities within the economic system. While Leibenstein (1968, 1979) perceives entrepreneurship as involving "activities necessary to create or carry on an enterprise where not all markets are well established or clearly defined and/or in which relevant parts of the production function are not completely known”. Gartner (1988) conceives entrepreneurship as the creation of new organizations. Okpara (2000) defines entrepreneurship as the willingness and ability of an individual to seek out investment opportunities in an environment and be able to establish and run an enterprise successfully based on the identifiable opportunities. In addition, Nwachukwu (1990) regards entrepreneurship as a process of seeing and evaluating business opportunities, gathering the necessary resources to take advantage of them and initiate appropriate action to ensure success. After critically studying the above definitions, we can summarize by concluding that entrepreneurship is a function which involves the exploitation of opportunities which exist within a market. Box 1.1 Definitions of entrepreneurship 2 Self employment of any sort; the activity that involves identifying opportunities within the economic system; the creation of new organizations; the willingness and ability of an individual to seek out investment opportunities in an environment and be able to establish and run an enterprise successfully based on the identifiable opportunities. Thus, from the definitions above we can see that while defining the concept ‘entrepreneurship’, laid emphasis on a wide spectrum of activities such as:  Self-employment of any sort.  Creation of organizations.  Innovation applied to a business context.  The combination of resources.  Identification and exploitation of opportunities within the economic system or market.  The bringing together of factors of production under uncertainty. We can therefore conclude that whatever activity that involves any or all of the above activities can be regarded as entrepreneurship. Entrepreneurship refers to all the processes and activities involved in establishing, nurturing, and sustaining a business enterprise. 1.1.2 Entrepreneur Scholars have also given several definitions of the concept ‘entrepreneur’. For instance in 1816, Putari (2006) quoted Say who asserts that the entrepreneur is the agent "who unites all means of production and who finds in the value of the products...the reestablishment of the entire capital he employs, and the value of the wages, the interest, and rent which he pays, as well as profits belonging to himself." He views entrepreneurs as change agents (Say, 1816). Knight (1921) views entrepreneurs as individuals who attempt to predict and act upon change within markets. Schumpeter (1934) conceives the entrepreneur as the innovator who implements change within markets through the carrying out of new combinations such as introduction of new techniques of production, reorganization of an industry and innovation. He further argues that the entrepreneur is an innovator, one that introduces new technologies into the workplace or market, increasing efficiency, productivity or generating new products or services (Deakins and Freel, 2009). Cantillon (circa 1730) conceptualized the entrepreneur as: the "agent who buys means of production at certain prices in order to combine them" into a new product (Schumpeter, 1951). In Quick MBA (2010), the entrepreneur is defined as one who combines various input factors in an innovative manner to generate value to the customer with the hope that this value will exceed the cost of the input factors, thus generating superior returns that result in the creation of wealth. The entrepreneur is the person who perceives the market opportunity and then has the motivation, drive and ability to mobilize resources to meet it (Di-Masi, 2010). An entrepreneur is a person who has possession of a new enterprise, venture or idea and assumes significant accountability for the inherent risks and the outcome (Wikipedia, 2010). The entrepreneur is anyone who has the capacity and willingness to undertake conception, 3 organization, and management of a productive venture with all attendant risks, while seeking profit as a reward (Business Dictionary, 2010). Interestingly, small business experts also have their definitions of the concept ‘entrepreneur’ (Thinking like, 2010) for instance: Reiss (2010), views the entrepreneur as the person that recognizes and pursues opportunities without regard to the resources he/she is currently controlling, with confidence that he/she can succeed, with the flexibility to change course as necessary, and with the will to rebound from setbacks. Pinson (2010) visualized the entrepreneur as a person who starts a business to follow a vision, to make money, to be the master of his/her own soul (both financially and spiritually) and is an "educated" risk taker. Murphy (2010) conceives an entrepreneur as a person who is dynamic and continues to seek opportunities and/or different methods of operation and will do whatever it takes to be successful in business. Given the above wide range of factors and behaviorur which are used to define the concept ‘entrepreneur’, we can see the difficulty and impossibility of finding a unified definition of the ‘entrepreneur’. Hence, to Di-Masi (2010), the concept ‘entrepreneur’ can be best used in the past tense to describe a successful business person. Thus, entrepreneurs are business persons who identify the existence of business opportunities and based on this they create businesses thereby creating new products, new production methods, new markets and new forms of organization to satisfy human needs and wants mostly at a profit. It should also be noted that though most entrepreneurial businesses start small, entrepreneurs are not only small business owners; they can also be big business owners. This is because successful entrepreneurs, unlike small business owners, are innovative and, when operating in an enabling business environment, can rapidly create a large amount of wealth while bearing very high risk. In fact, innovation is considered to be the strategic tool of entrepreneurs; this is one of the tools that enable them gain strategic advantage over competitors (QuickMBA, 2010). Entrepreneurs are individuals or groups of individuals who carryout entrepreneurship activities to build business empires. 1.1.3 Intrapreneurs There are given situations where an entrepreneur is not able to establish his or her own business and as such has to work in an organization. In this case they are referred to as ‘Intrepreneurs’ i.e. entrepreneurs within an organization. These individuals are entrepreneurs in their own right because they pursue the exploitation of business opportunities as they emerge and are also visionaries within a given organization. Thus, once identified, these individuals should be encouraged to manifest their entrepreneurial abilities to the benefit of the organization otherwise they will be frustrated and may leave the organization or start their own businesses. Entrepreneurship is the processes and activities by which corporate organization behave entrepreneurially. o How is entrepreneur differ from intrapreneur  An entrepreneur is a person who create a venture or startup a business and nature it, takes risks of bringing together the factors of production to meet the society’s need at a profit, while an intrapreneur work within an existing organization to pursue the exploitation of business opportunities 1.1.4 Technopreneur 4 We could also have technopreneur, who is an individual whose business is in the realm of high technology, who at the same time has the spirit of an entrepreneur. A technopreneur’s business involves high technology or to put it more clearly a technopreneur is a technological innovator and a business man all combined in one individual (Ogundele, 2007). 1.2 Types of entrepreneur Based on the interaction with the business environment, various types of entrepreneurs can emerge. To this effect, Rockstar (2008) identifies the four types of entrepreneurs as Innovative, Imitating, Fabian and Drone. 1.2.1 Innovative This type of entrepreneur is preoccupied with introducing something new into the market, organization or nation. They are interested in innovations and invest substantially in research and development. 1.2.2 Imitating These are also referred to as ‘copy cats’. They observe an existing system and replicate it in a better manner. They could improve on an existing product, production process, technology and through their vision create something similar but better. This is the case of the student becoming better than the master! 1.2.3 Fabian These are entrepreneurs that are very careful and cautious in adopting any changes. Apart from this, they are lazy and shy away from innovations. 1.2.4 Drone These are entrepreneurs that are resistant to change. They are considered as ‘old school’. They prefer to stick to their traditional or orthodox methods of production and systems. Entrepreneurs occupy three roles, namely as agent of (1) economic change (2) social change and (3) technological change. These are referred to as behavioral roles. The types and roles of entrepreneur notwithstanding, all entrepreneurs possess certain characteristics and are motivated to become entrepreneur due to certain factors or circumstances which we shall discuss in this unit. 1.3 Characteristics of Entrepreneurship and Entrepreneurs Scholars do not agree on the characteristics possessed by entrepreneurs. Hence, several scholars through various studies identified several characteristics or traits possessed by entrepreneurs some of which are discussed as follows. For instance,Rockstar (2008) recognized the characteristics of entrepreneurship as: Creative Activity: Entrepreneurship entails innovations. It deals with product innovation, production techniques innovation while bearing in mind the market; Dynamic Process: Entrepreneurship is a dynamic process that has to bear in mind the dynamic business environment. 5 Purposeful Activity: Entrepreneurship is an activity embarked upon for a specific purpose. This could be for profit making purposes, for humanitarian purposes or to bring a difference to the market. Involves Risk: Entrepreneurship is a very risky venture; entrepreneurial decisions can have far-reaching impact on the organization, people in the organization and even the economy. These decisions are critical, enormous and cannot be easily reverted. Rockstar (2008) then identifies the following characteristics of entrepreneurs as: risk bearing ability, technical knowledge, and ability to gather financial and motivational resources. Di- Masi (2010), on the other hand, regards the major characteristics of entrepreneurs as: self confidence and being multi-skilled, confidence in the face of difficulties and discouraging circumstances, risk-taking, innovative skills, results-oriented, total commitment. Stephenson (2010) believes that entrepreneurial characteristics are: seriousness, planning ability, prudence, and team work. Hadzima and Pilla (2010) conclude that the characteristics of highly effective entrepreneurs include: ability to deal with risk, being results oriented, enthusiasm and energy, growth potential, team work, multitasking ability and improvement orientation. Driessen and Zwart (2010), after carefully studying various researches conducted into the characteristics of successful entrepreneurs, identified three main characteristics and five secondary characteristics of successful entrepreneurs. According to them, the main characteristics are: need for achievement (n Ach), internal locus of control (ILOC) and risk taking propensity (RTP), while they also stated the five secondary characteristics as: need for autonomy (n Aut), need for power (n Pow), tolerance of ambiguity (ToA), need for affiliation (n Aff), and endurance (End). They then concluded that in these studies, successful entrepreneurs score significantly higher on these characteristics than less successful entrepreneurs, small business managers, and non-entrepreneurs (Driessen & Zwart, 2010). Other characteristics identified are: discipline, vision or creativity, calmness, risk tolerance: Focused, balance, (LifeHack, 2008), commitment, perseverance, initiative, versatility, dynamic, knowledgeable/skilled, emotional or mental strength, and resilience. A careful look at the characteristics listed above reveals that some of them overlap while most of them are divergent thereby further fuelling the debate. Some of these characteristics are briefly discussed below. Risk Bearing Ability: The entrepreneur must have the capacity to bear risk. This is because the new venture is created in an uncertain and risky environment. Di-Masi (2010, however, noted that although risk bearing is an important element of entrepreneurial behavior, many entrepreneurs have succeeded by avoiding risk where possible and seeking others to bear the risk. Basically, what he is saying here is that entrepreneurs bear calculated risks and are more than glad to let others bear their risk when it is convenient for them. Technical Knowledge: Depending on the kind of venture created, the entrepreneur must have technical expertise about production techniques and marketing. Ability to Gather Financial and Motivational Resources: Financial and motivational resources are needed for the creation of the new business. Sometimes the entrepreneur, as 6 an individual may not have these resources but he/she/they should have the ability to gather it from those who have it. Self Confidence and Multi-Skilled: The entrepreneur must have self confidence and believe in him/herself. Self-confidence is an important characteristic that enables individuals to handle any situation without having inferiority or any other type of complex. The entrepreneur also has to be a jack of all trade and master of all. He/she must possess different skills unlike other individuals. For instance, assuming an entrepreneur is a marketer, the entrepreneur should not only possess marketing skills and interpersonal skills but also language skills i.e. ability to speak more than one language. This definitely will be an added advantage! Confidence in the Face of Difficulties and Discouraging Circumstances: The entrepreneur must be steadfast and resolute and be ready to move on even in the face of adversity. He/she should be a ‘never say never’ kind of person; everything is possible for the entrepreneur. Innovative skills: The entrepreneur may not necessarily be an 'inventor' but the one that can make a difference; he/she should be able to see what others cannot see and be able to carve out a new niche in the market place. Results-Orientated: The entrepreneur is one who knows how to get results under any circumstances either with others or through others. The entrepreneur does this by setting goals and ensuring that such goals are doggedly pursued by all concerned willingly and with joy. Risk-Taker: The business environment is dynamic and filled with uncertainties and risk. In order to succeed the entrepreneur has to take risk. Successful entrepreneurs take calculated risks and in some cases shift the risks to others. Total Commitment: Starting /creating a new business is a serious exercise that requires a lot of commitment and hard work. It is like bringing a child into the world and nurturing the child to adulthood. This requires commitment, dedication, hard work, energy and single- mindedness otherwise the ‘child’ (i.e. business) may die prematurely (Di-Masi, 2010). Calm: Entrepreneurs need to be cool, calm and collected. They have to remain calm even when exposed to stress, emergency or crisis situations. Focused: In getting things done and starting and maintaining a business attention has to be paid to a lot of details. Small things when not handled properly or noticed on time may lead to disastrous outcomes. Tolerance: The entrepreneur has to relate with people. People vary in terms of their perceptions, personality, motivations and attitudes amongst other things. The entrepreneur needs to be tolerant while not being weak, in order to get things done. Balance: Though, the entrepreneur is a human being, he/she has to be like a super human being in order for him to succeed. To this effect, he/she has to be able to balance all 7 emotions and characteristics and remain focused and objective while having emotional or mental strength and resilience. Balance is important because too much of everything is bad. Versatility: The entrepreneur has to be versatile and be ready to learn and use information technology and other technology to the best advantage. Seriousness: The entrepreneur has to believe in him/herself and the business and get things done with total seriousness. As mentioned earlier, starting a new business is like giving birth to a child; it is indeed a very serious business. Planning Ability: The entrepreneur must be a planner; he/she must formulate goals and develop action plans to achieve them. Planning is important for he/she who fails to plan, plans to fail! Prudence: The entrepreneur must be versatile in financial management. This is because finance is the life-wire of the business. Also, to achieve the profit objective, the entrepreneur must engage in efficient and effective financial management, and have sound financial policies and practices. Customer-Centric: Businesses are created to satisfy unmet needs. A successful entrepreneur must be able to anticipate customers’ needs and satisfy them through his/her product offerings. To do this effectively, the entrepreneur has to adopt a customer-centric or customer-focused approach. Team Player: Creating a successful business is a one man business but maintaining and sustaining the business cannot be done by one person. The entrepreneur needs others to work with him hence he has to have a formidable or winning team. To this effect, the entrepreneur has to be an effective team manager and recruit the right team members but the entrepreneur’s most important team members are the customers for without customers a business cannot survive (LifeHack, 2008; Rockstar, 2008; Di-Masi, 2010; Driessen & Zwart, 2010; Hadzima & Pilla, 2010 Stephenson, 2010). 1.4. Roles of Entrepreneurs In order to perform their functions effectively and operate a successful business, entrepreneurs have to perform certain roles. These roles are the same as the basic managerial roles which are identified by Henry Mintzberg in 1973. They are as follows: Figure Head Role: The entrepreneur has to act as figure head in the organization, as such; he/she has to perform ceremonial duties. This is done by representing the organization in formal and informal functions. Leader Role: The entrepreneur has to act as a leader because the entrepreneur is the one who brings other people together in order to create the business. Thus, he/she has to lead the people in the organization by hiring, firing, training and motivating them. Liaison Role: The entrepreneur has to act as the link between the business and the parties outside the business. 8 Monitor Role: The entrepreneur acts as a monitor; he monitors both the internal and the external environment of the business constantly. Information Disseminator Role: The entrepreneur has to act as the organizational representative and transmit information both within and outside the business. Spokesman Role: The manager has to act as the spokesman of the business; he/she is the person for the business both inside and outside. Entrepreneurial Role: This is the basic role of the entrepreneur; he/she launches new ideas for the business and bears the risk. Disturbance Handler: The entrepreneur also acts as arbitrator in situations of conflict so as to maintain organizational harmony. Resource Allocator: The entrepreneur decides on how the scarce resources of the business are allocated among its competing ends so as to achieve organizational goals and objectives. Negotiator Role: The entrepreneur has to negotiate on behalf of the business both with the other categories of labour and other outside sources. The specific entrepreneurial roles noted earlier on have a number of activities in each role. They are specified below: Social Roles of Entrepreneur  Transformation of traditional indigenous industry into a modern enterprise.  Stimulation of indigenous entrepreneurship.  Job or employment creation in the community.  Provision of social welfare service of redistributing wealth and income. Economic Roles of Entrepreneur  Bearing the ultimate risk of uncertainty.  Mobilizing savings necessary for the enterprise.  Providing channel for the disposal of economic activities.  Utilizing local raw materials and human resources. Technological Roles of Entrepreneur  Stimulation of indigenous technology in the production process.  Adapting traditional technology to modern system.  Adapting imported technology to local environment.  Developing technological competence in self and the workforce through innovation (Ogundele, 2007). 9 Summary of module 1 study session 1 1 This study session discusess the evolution and definitions of entrepreneurship. It examines how the concept of entrepreneurship originated and the various ways in which various scholars have defined the concept over the years. 2 The study session also identifies characteristics of entrepreneurship and that of entrepreneurs. It also highlights the traits possessed by entrepreneurs. 3 It also examines the roles played by the entrepreneur in ensuring that the business created survives in the dynamic business environment. 4 Finally the study session identifies the different types of entrepreneurs that can emerge. 10 Self-Assessment Questions for module 1 study session 1 1. The concept ‘entrepreneur’ was first coined by……………... (a) David, McCllenand (b) Richard, Cantillon (c) David, Hisrich (d) Jean-Baptiste, Say 2. The non-continuous process of combining resources of time, man, money and materials to create products, services and ideas is ……….. (a) entrepreneurship (b) management (c) Intrapreneurship (d) production 3. An individual that exhibits innovative abilities, perceives the market opportunities, and has the motivation, drive and ability to mobilize resources to meet market opportunities, while working in an existing organization is referred to as a(an)……………… (a) entrepreneur (b) inventor (c) intrepreneur (d) manager 4. The characteristics of entrepreneurs as risk-bearers, coordinators and organizers, gap-fillers, leaders, and innovators or creative imitators were listed by…………….. (a) Adam Smith (b) David Ricardo (c) John Stuart Mill (d) Joseph Schumpeter 5. The two disciplines where entrepreneurship originated were …… / …… a. French / English b. Economics / Business c. Economics / History d. History / French 6. The one who creates a new enterprise in a risky and uncertain environment is referred to as a (an)……………... a. risk taker b. entrepreneur c. adventurist d. leader 7. Which one of the following is not considered as entrepreneurship? a. The creation of a new business. b. The routine management of an ongoing operation. c. Innovation applied to a business context. d. The combination of resources. 8. The scholar who first stressed the significance of entrepreneurship for economic growth is………. (a) Cantillon (b) Mill (c) Quesnay 11 (d) Ricardo 9. When an entrepreneur directs and controls all organizational activities to ensure that things are done properly on schedule, he is performing the…….. role. (a) leader (b) resource allocator (c) directing and controlling (d) visionary 10. An Entrepreneur who starts a business with a fresh idea is simply performing a …………. role. (a) leadership (b) resource allocator (c) directing and controlling (d) visionary Solution to MCQs Ques. 1 2 3 4 5 6 7 8 9 10 Ans. B A C D B B B A A B REFERENCES Brockhaus & Horwitz (1986). in Putari, Vijith (2006). “Re: Evolution of Entrepreneurship”. March, 2nd. http://www.managementparadise.com/forums/entrepreneurship/1118- Evolution-entrepreneurship.html.Retrieved,7th August, 2010. BusinessDictionary.Com (2010). “Entrepreneurship”. http://www.businessdictionary.com/ definition/entrepreneurship.html. Retrieved,8th August, 2010. Burnett, David (2000). “Hunting for Heffalumps: The Supply of Entrepreneurship and Economic Development”. technopreneurial.com. September. http://www.technopreneurial.com/ articles/history.asp. Cantillon, R. (circa 1730). in Putari, Vijith (2006).“Re: Evolution of Entrepreneurship”. March, 2nd. http://www.managementparadise.com/forums/entrepreneurship/1118- Evolution-entrepreneurship.html.Retrieved, 7th August, 2010. Deakins, D & Freel, M. (2009). Entrepreneurship and Small Firms. in Wikipedia (2010). “Entrepreneur”. Wikipedia, the free encyclopedia.http://en.wikipedia.org/ wiki/Entrepreneur#cite_ref-0. 12 Di-Masi, Paul (2010). “Defining Entrepreneurship”.http://www.gdrc.org/icm/micro/define- micro.html. Retrieved , 7th August, 2010. Gartner (1988) in Putari, Vijith (2006). “Re: Evolution of Entrepreneurship”. March, 2nd. http://www.managementparadise.com/forums/entrepreneurship/1118- Evolution-entrepreneurship.html.Retrieved,7th August, 2010. Knight, Frank (1921) in Putari, Vijith (2006). “Re: Evolution of Entrepreneurship”. March, 2nd. http://www.managementparadise.com/forums/entrepreneurship/1118- Evolution-entrepreneurship.html.Retrieved,7th August, 2010. Leibenstein, Harvey (1968, 1979) in Putari, Vijith (2006). “Re: Evolution of Entrepreneurship”. March, 2nd. http://www.managementparadise.com/forums/entrepreneurship/1118- Evolution-entrepreneurship.html.Retrieved,7th August, 2010. Min, S. J. (1999). “Made or Born”, Entrepreneurship of the Year Magazine, Vol. 80, Fall. Mintzberg, H. (1973). The Nature of managerial Work, New York: Harper And row publishers. Murphy, Gillian (2010). in Thinkinglike (2010). “Entrepreneur: What’s In a Definition?” http://www.thinkinglike.com/Essays/entrepreneur-definition.html. Retrieved, 8th August, 2010. Ogundele, O.J.K. (2007). Introduction to Entrepreneurship Development, Corporate Governance and Small Business Management. Lagos: Molofin Nominees Putari, Vijith (2006). “Re: Evolution of Entrepreneurship”. March, 2nd. http://www. managementparadise.com/forums/entrepreneurship/1118-evolution- entrepreneurship.html. Retrieved,7th August, 2010. Penrose (1963). in Putari, Vijith (2006). “Re: Evolution of Entrepreneurship”. March, 2nd. http://www.managementparadise.com/forums/entrepreneurship/1118- Evolution-entrepreneurship.html.Retrieved,7th August, 2010. Pinson, Linda (2010) in Thinkinglike (2010). “Entrepreneur: What’s In a Definition? http://www.thinkinglike.com/Essays/entrepreneur-definition.html. Retrieved, 8th August, 2010. QuickMBA (2010). “Entrepreneurship: Definition”. QuickMBA.com.http:// QuickMBA.com/entre/Retrieved, 8th August, 2010. Reiss, Bob (2010). in Thinkinglike (2010). “Entrepreneur: What’s In a Definition? http://www.thinkinglike.com/Essays/entrepreneur-definition.html. Retrieved, 8th August, 2010. 13 Say, Jean Baptiste (1816). in Putari, Vijith (2006). “Re: Evolution of Entrepreneurship”. March, 2nd. http://www.managementparadise.com/forums/entrepreneurship/1118- evolution-entrepreneurship.html. Retrieved, 7th August, 2010. Schumpeter, J. A. (1934). The Theory of Economic Development. Cambridge, MA: Harvard University Press. Schumpeter, J.A. (1934). in Putari, Vijith (2006). “Re: Evolution of Entrepreneurship”. March, 2nd. http://www.managementparadise.com/forums/entrepreneurship/1118- Evolution-entrepreneurship.html.Retrieved, 7th August, 2010. Schumpeter, J.A. (1951). in Burnett, David (2000). “Hunting for Heffalumps: The Supply of Entrepreneurship and Economic Development”. technopreneurial.com. September. http://www.technopreneurial.com/articles/history.asp. Sexton & Smilor, Wortman (1987). in Putari, Vijith (2006). “Re: Evolution of Entrepreneurship”. March, 2nd. http://www.managementparadise.com/forums/ Entrepreneurship/1118-Evolution-entrepreneurship.html. Retrieved,7th August, 2010. Srinivas, Hari (2010) in Di-Masi, Paul (2010). “Defining Entrepreneurship”. http://www.gdrc. org/icm/micro/define-micro.html. Retrieved, 7th August, 2010. Thinkinglike (2010). “Entrepreneur: What’s In a Definition? http://www.thinkinglike.com/ Essays/entrepreneur-definition.html. Retrieved, 8th August, 2010. Wikipedia (2010). “Entrepreneur”. Wikipedia, the free encyclopedia.http://en.wikipedia.org/ wiki/Entrepreneur#cite_ref-0. FURTHER READING Appleby, Robert C. (1984). Modern Business Administration, London: The Pitman Press. Asika, N. M.(2004). Business Organization & Management, Lagos: Mukugamu & Brothers Enterprises. Kuye, Owolabi (2004). Management Concepts And process (An Expository Approach), Lagos: Harry-Dons Ventures. Lawal, A. A. (1993). Management In Focus, Lagos: Abdul Industrial Enterprises. Nwachukwu, C. C. (1988). Management Theory And Practice, Anambra: Africana-FEP Publishers Limited. 14 Module 1 Study session 2: Entrepreneurial Motivations, variables, creativity and innovation Introduction In this study session, you are going to learn about what motivate people to become entrepreneurs, Creativity, innovation and entrepreneurial variables. You can look around you and see products that are different from what they were years before. Also, you may notice that services are being delivered in better ways than before. These are the end results of creativity and innovation.Many organizations view innovation as the domain of Research and Development (R&D) only, or perhaps of R&D and marketing. People in manufacturing, supply chain, human resources, finance, service, and other functional areas can be creative too - if given an opportunity. Creativity and imagination are unevenly and rather randomly distributed, and one never knows where the next big idea will come from (Loewe and Dominiquini, 2006). Building a sustainable competence for innovation requires an organisation to harness the creativity of its employees. The initiative provides a chance for the organization to think more holistically about innovation from a business model perspective as accountants and plant managers’ work alongside salespeople, engineers and chemists. Each team member brings his or her own expertise to the table (Loewe and Dominiquini, 2006). Learning outcome for module 1 study session 2 At the end of this study sesion, you should be able to 2.1 Define and use correctly all the key words printed in bold (SAQ2.1) 2.2 Discuss the motivational and non-motivational influences on entrepreneurship. (SAQ 2.3 Identify entrepreneurship variables (SAQ 2.3) 2.4 Define Creativity and innovation (SAQ 2.3) 2.5 Explain creativity process (SAQ 2.3) 2.6 Discuss various forms and classifications of innovation (SAQ 2.4) 2.7 Discuss the phases in successful innovation (SAQ 2.4) 2.1 Entrepreneur motivations Motivation is the driving force within individuals that propel them to action. Entrepreneurial motivations are those factors that propel individuals to become entrepreneurs. Scholars have conducted various researches on entrepreneurial motivations and have come up with several factors that motivate people to become entrepreneurs. Some scholars have adopted the trait approach and come up with certain traits and characteristics that they believe entrepreneurs possess. 15 Some of these characteristics have been discussed earlier on in the previous study session. However, the problem with this school of thought is that the scholars do not agree on the special characteristics that the entrepreneur possess; also it has been discovered that there are some successful entrepreneurs that do not possess some or all of the special characteristics identified. Shane, Locke and Collins (2003) discussed the major motivations that prior researchers have suggested could influence the entrepreneurial process, as well as motivations that are less commonly studied in this area. They argue that human motivations influence entrepreneurial decisions. Furthermore, scholars are of the opinion that variance across people in these motivations will influence who pursues entrepreneurial opportunities, who assembles resources, and how people undertake the entrepreneurial process. They identify several human motivations that influence the entrepreneurial process and conclude that entrepreneurship is not solely the result of human action, (external factors also play a role e.g., the status of the economy, the availability of venture capital, the actions of competitors, and government regulations). However, if the environmental factors are held constant, they observe that human motivation plays a critical role in the entrepreneurial process. They also stress that motivational differences such as need for achievement, risk taking, tolerance for ambiguity, and locus of control, self-efficacy and desire for independence, drive and egoistic passion also influence the entrepreneurial process. They discover that people vary in their willingness and ability to engage in the entrepreneurial process because of non-motivational individual differences such as their opportunity cost (Amit, Muller & Cockburn, 2009), their stocks of financial capital (Evans & Leighton, 1989), their social ties to investors (Aldrich & Zimmer, 1986), and their career experience (Carroll & Mosakowski, 1987; Cooper, Woo, & Dunkleberg, 1989). Other non-motivational factors that influence entrepreneurship are life-path circumstances (such as unsatisfactory work environment, negative displacement, career transition and positive pull influences) and background characteristics (such as childhood, family environment, education, age and work history) (Unilag, 2007). Bhat and McCline (2005) also studied what motivates people to become entrepreneurs and identified entrepreneurial motivators to be: Desire for Innovation, the desire for autonomy, wealth and financial independence, the achievement of personal objectives and the propensity for action ('doing') and excitement of entrepreneurship. Some of these factors are briefly discussed in the following sections. o What are those things within you to propel you to startup a business of your own  These entreprenurial motivations that propel an individual to become entrepreneurs and they include discovery of opportunities, need for achievement, desire to be one’s own boss etc 2.2 Motivational Influences on Entrepreneurship or Bright Side of Entrepreneurs Bright side refers to the positively energizing influence of each of the issues listed below. Shane et al. (2010) identified the motivational influences on entrepreneurship as: 16 2.2.1 Need for Achievement David C. McClelland, a psychologist, the father of the Need for Achievement Theory posits that individuals who are high in N Ach are more likely than those who are low in N Ach to become entrepreneurs. This is because such individuals tend to engage in activities or tasks that have a high degree of individual responsibility for outcomes, require individual skill and effort, have a moderate degree of risk, and include clear feedback on performance. In a nutshell, these individuals effectively operate in situations in which they can achieve results through their own efforts, pursue moderately difficult goals and receive relatively immediate feedback on the outcomes of their performance (Unilag, 2007). 2.2.2 Risk taking Propensity Risk-taking propensity has been defined in the entrepreneurship literature as the willingness to take moderate risks (Begley, 1995). This motivational influence on entrepreneurship is an offshoot of the need for achievement factor, for individuals with a high need for achievement would have moderate propensities to take risk. This is because activities with moderate risk are challenging and at the same time appear to be attainable (Atkinson, 1957). 2.2.3 Tolerance for Ambiguity According to Budner (1962), an ambiguous situation is "one which cannot be adequately structured or categorized by an individual because of the lack of sufficient cues while he defined intolerance of ambiguity as the tendency to perceive ambiguous situations as sources of threat. And Teoh and Foo (1997) define tolerance of ambiguity as the ability to respond positively to ambiguous situations. Thus, because the entrepreneur creates a new business in an uncertain and risky situation, an individual that has intolerance for ambiguity cannot be an entrepreneur. 2.2.4 Locus of Control This refers to the extent to which an individual believes in fate and their ability to control fate. Individuals who have an external locus of control believe that the outcome of an event is outside their control, and view fate as mainly determined by external forces and luck. On the other hand, individuals with an internal locus of control believe that their personal actions directly affect the outcome of an event. Thus, individuals with internal locus of control are propelled to become entrepreneurs because they believe that they control their fate (Rotter, 1966; UNILAG GST Module 1, 2007). 2.2.5 Self-efficacy This is conceptualized as the belief in one’s ability to muster and implement the necessary personal resources, skills, and competencies to attain a certain level of achievement on a given task. Self-efficacy is basically, task-specific self-confidence (Bandura, 1997; Shane et al., 2010). An individual with high self-efficacy will take negative feedback in a more positive manner and use that feedback to improve his/her performance hence is more likely to become an entrepreneur. 2.2.6 Desire for Independence This could be in terms of financial or job independence. Independence entails taking the responsibility to use one’s own judgment as opposed to blindly following the assertions of others. It also involves taking responsibility for one’s own life rather than living off the efforts of others. An entrepreneur is a decision maker and must have a mind of his/her own. 17 The entrepreneur gives the order, while others follow! Thus, once an individual desires to be independent and take total control of his/her life, then that person is propelled to become an entrepreneur. 2.2.7 Drive Shane et al. (2003) used this concept to refer to the willingness to put forth effort (i.e. both the effort of thinking and the effort involved in bringing one’s ideas into reality). According to them there are four aspects of drive, namely: (1) ambition; (2) goals; (3) energy and stamina; and (4) persistence. Thus, once an individual has drive, he will be propelled to become an entrepreneur. 2.2.8 Egoistic passion Shane et al. (2003) viewed egoistic passion as a passionate, selfish love of the work. According to them, the true or rational egoist passionately loves the work; loves the process of building an organization and making it profitable and is motivated to do what is actually in his/her own interest. Thus, once an individual has egoistic passion, then he/she is propelled to become an entrepreneur. o Identify and discuss any three characteristics of a successful entrepreneurs  Need for achievement: individuals who effectively operate in situations in which they can achieve results through their own efforts, pursue moderately difficult goals and receive relatively immediate feedback on the outcomes of their performance  Desire for independence: This could be in terms of financial or job independence. Independence entails taking the responsibility to use one’s own judgment as opposed to blindly following the assertions of others.  Self-efficacy will take negative feedback in a more positive manner and use that feedback to improve his/her performance hence he/she is more likely to become an entrepreneur. 2.3. Non-Motivational Influences on Entrepreneurs or the Dark Side of entrepreneur Non-motivational influences or the dark side is used with reference to the stress producing tendency of each of the issues discussed below. 2.3.1 Opportunity Cost According to a study by Amit et al., (2009) entrepreneurs are more likely to undertake entrepreneurial activities when their opportunity costs are lower. That is paid workers who chose to become entrepreneurs do so because they have less to lose (i.e. lower opportunity costs) by leaving their paid work. 2.3.2 Stocks of Financial Capital: This refers to the amount of money an individual is able to accumulate or stock. Evans and Leighton (1989) found that the hazard into self-employment is constant in age. And older workers tend to have the propensity to become entrepreneurs because they would have had time to build up the capital needed to start a business unlike younger workers. 18 2.3.3 Social Ties to Investors The importance of social embeddeding in the creation of a new business has been appreciated by scholars of entrepreneurship. Aldrich and Zimmer (1986) note that entrepreneurs are highly social actors and they actively embed themselves in social contexts. For instance, in the course of their entrepreneurship research, they found that immigrant entrepreneurs in many cases formed ethnic networks to share capital or business in order to overcome hostility in the host countries. Thus, given these conditions, an individual will be propelled to become an entrepreneur. 2.3.4 Career Experience This is closely related to unsatisfactory work experience. If an individual is not happy with his/her job and has acquired a great deal of experience on the job and possesses entrepreneurial abilities, then there is the tendency for the person to become an entrepreneur. 2.3.5. Life-Path Circumstances This refers to individual circumstances within the life-path of individuals that propel them to become entrepreneurs. These are factors such as: 2.3.6 Unsatisfactory Work Environment When an individual is dissatisfied with his work environment or finds the work environment unconducive, then in rebellion, he will quit the job and seek alternative employment. However, if the individual in question is an entrepreneur, then he is likely going to start his own business. 2.3.7.Negative Displacement This arises when unforeseen circumstances in an individual’s life-path causes the person to make major changes in lifestyle. This could be an accident, the loss of dear ones or sponsors etc. When such occurrences happen, the individual is forced to undergo a drastic change in the lifestyle and as such may become an entrepreneur. 2.3.8 Career Transition This situation arises when an individual is between one career-related activity and another. For instance, when an individual who was initially a copy typist goes to Secretarial School and obtains a certificate, then there is a career transition which can necessitate the creation of a new business. 2.3.9 Positive Pull Influences This refers to centers of influence within the society. That is, individuals whom people look up to as mentors encourage a person to become an entrepreneur. 2.3.10 Background Characteristics This has to do with factors such as: childhood, family environment, education, age and work history. It is believed that position in the family, i.e. whether first born, last born, only child, upbringing, educational level and age influence the propensity of the individual to become an entrepreneur. For instance, an issue of debate among scholars is whether entrepreneurs tend to be only child or first born child of a family. Other scholars argue that individuals are more likely to become entrepreneurs when they are between the ages of 25 and 40 years, while some other scholars contend that individuals are more likely to become entrepreneurs when they are between the ages of 22 and 55 years. Another group of 19 scholars disagree with these positions by stating that individuals could become entrepreneurs even before the age of 22 years or even after the age of 55years (Unilag GST Module 1, 2007). 2.4 Entrepreneurship Variables What factors affect the supply of entrepreneurship? Basically, two factors affect the supply of entrepreneurship: opportunity and willingness to become an entrepreneur. Opportunity is the possibility to become self-employed if one wants to. The primary factors that affect opportunity are: 2.4.1 The individual’s intrinsic entrepreneurial ability and intuition (Allinson, Chell & Hayes, 2000). The degree to which the spirit of enterprise exists or can be initiated in the individual is through the society, by the society and culture in which he is embedded (Morrison, 1998). 2.4.2 The general macro-economic environment. One of the primary determinants of the supply of entrepreneurship is the willingness of an individual to become an entrepreneur. Willingness is a personalized activity. It goes beyond intentions and/or new idea conceptualization. Willingness must lead to the creation of enterprise from nothing (Timmons, 1989).It also involves the relative evaluation of work in self employment compared with one’s other options for employment (Praag et al, 1995). The supply of entrepreneurship is seen thus, to be dependent on both individual level factors and general economic and non-economic factors. To encourage entrepreneurship, policy makers can improve the economic factors that face entrepreneur by initiating reforms that increase both the market incentives and availability of credit and capital to entrepreneurs (Wilken, 1972). Therefore, instituting appropriate market and tax regulations a country can encourage and increase the supply of entrepreneurs in its population. The second major determinant of the supply of the entrepreneurship is opportunity. In order for an individual to start his own enterprise, it is necessary for him to have the credit or capital to finance the initial start-up cost. Policy makers can encourage the supply of entrepreneurship by creating programmes and institutions such as SMEDAN to encourage and assist entrepreneurs to find capital, draw-up business plans, and comply with the various business and tax regulations. On developing entrepreneurship, new education initiatives could be created to teach entrepreneurship. By equipping more people with the skills’ attitudes and characteristics to become entrepreneurs; by promoting and developing entrepreneurial spirit within the society, a country can effectively increase its supply entrepreneurs. 2.5 Creativity The terms creativity and innovation are often used to mean the same thing, but each has a unique connotation. Creativity is ‘’ the ability to bring something new into existence.”This emphasizes the “ability,” not the “activity,” of bringing something new into existence. A person may therefore concieve of something new and envision how it will be useful, but not 20 necessarily take the necessary action to make it a reality. Innovation is the process of doing new things. It is the conversion of creative ideas into market place reality, which people are prepared to buy. This distinction is significant. Ideas have little value until they are converted into new products, services, or processes. Innovation, therefore, is the transformation of creative ideas into useful applications but creativity is prerequisite to innovation (Holt, 1992;) 2.5.1 Stages of creativity Figure 1: The creative processs Idea Preparation: Incubation: Germination: Concious search for Subconcious The seeding stage of knowledge assimilation of a new idea rationalization information recognition fantasizing Illumination: Verification: Recognition of idea Application or test to as being feasible prove idea has value realization validation Source: Holt (1992) According to Holt (1992), the creative process comprises the following five stages as shown in figure 1: 1. Idea germination Exactly how an idea is germinated is a mystery; it is not something that can be examined under the microscope. For most entrepreneurs, ideas begin with interest in a subject or curiosity about finding a solution to a particular problem. 2. Preparation Once a seed of curiosity has taken form as a focused idea, creative people embark on a conscious search for answers. If it is a problem they are trying to solve, then they begin an intellectual journey, seeking information about the problem and how others have tried to resolve it. Inventors will set up laboratory experiments, designers will begin engineering new product ideas, and marketers will study consumer buying behaviour. 3. Incubation The idea, once seeded and given substance through preparation, is put on a back burner, the subconscious mind is allowed time to assimilate information. Incubation is a stage of ‘mulling it over’. When an individual has consciously worked to resolve a problem without success, allowing it to incubate in the subconscious will often lead to a resolution. 4. Illumination Illumination occurs when the idea surfaces as a realistic creation. This stage is critical for entrepreneurs because ideas, by themselves, have little meaning. Reaching the illumination stage separates daydreamers and tinkerers from creative people who find a way to transmute values. 21 5. Verification An idea once illuminated in the mind of an individual still has little meaning until verified as realistic and useful. Thus, verification is the development stage of refining knowledge into application. According to Adams (2005), the following are critical to individual creativity: 1) Knowledge: The T-shape mind with a breadth of understanding across multiple disciplines and one or two areas of indepth expertise. 2) Thinking: a strong ability to generate novel ideas by combining previously disparate elements. This ‘synergistic’ thinking must be combined with analytical and practical thinking. 3) Personal motivation: the appropriate levels of intrinsic motivation and passion for one’s work combined with appropriate synergistic motivators and self-confidence. 4) Environment: a non-threatening, non-controlling climate conducive to idea combination and recombination such as ‘intersection’. 5) An explicit decision to be creative along with a meta-cognitive awareness of the creative process can go a long way in enhancing long-term creative results. o What are the factors that encourage creativity  The factors are knowledge of noble idea generation, thinking, personal motivation, environment and determination to be unique. 2.6 Innovation and its benefits Zimmerer, Scarborough, and Wilson (2008) define innovation as the specific instrument of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. As a dimension of corporate entrepreneurship, innovation is a firm’s commitment to creating and introducing products, production processes, and organisational systems (Covin and Slevin, 1991; Lumpkin and Dess, 1996; Zahra, 1996). Innovation is the process that provides added value and novelty to the firm and its suppliers and customers through the development of new procedures, solutions, products and services as well as new methods of commercialisation (Shaw, O’Loughlin and McFadzean, 2005). According to Knight (1997) and Kreiser, Marino and Weaver (2002) in Scheepers (2007), innovativeness refers to the capability, capacity and willingness of an enterprise to support creativity and experimentation to solve recurring customer problems. Innovativeness entails creativity and experimentation that result in new products, new services, or improved technological processes (Dess and Lumpkin, 2005). It is arguably the most essential component of corporate entrepreneurship (Fitzsimmons, Douglas, Antoncic, and Hisrich (2005). Innovation is the outcome of the firm’s effective development and use of new technologies and/or knowledge about market opportunities (Ireland, Hitt, Camp, and Sexton, 2001). For a firm to be innovative, it needs to have a free-wheeling, “boundary less” brainstorming culture to engender creative ideas (Khandwalla and Mehta, 2004). It also requires that organisations depart from existing technologies and practices and venture beyond the 22 current state (Dess and Lumpkin, 2005). Its attribute describes a firm’s imperative to initiate newness with added value (Aloulou and Fayolle, 2005). Innovation can lead to competitive advantage and provide a basis for firm growth (Hitt, Hoskisson, and Kim, 1997). Innovative firms develop strong, positive market reputations. They engage in opportunity exploration which includes behaviour such as looking for ways to improve current products, services or processes, or trying to think about current work processes, products or services in alternative ways (De Jong and Wennekers, 2008). Innovative firms also adapt to market changes and exploit market or opportunity gaps. Sustained innovation moreover distances entrepreneurial firms from their industry rivals, and thus increases financial returns (Bhardwaj, Sushil and Momaya, 2007). 2.6.1 Forms of Innovations According to Hamel (1997) in Dess and Lumpkin (2005), innovations come in different forms: Technological innovativeness primarily comprises research and engineering efforts aimed at developing new products and processes. Products-market innovativeness consists of market research, products design, and innovations in advertising and promotion. Administrative innovativeness is concerned with novelty in management systems, control techniques, and organisational structure. Innovation can also be classified in terms of whether it is incremental, modular, architectural or radical (Henderson and Clark, 1990 in Hager, 2006): Incremental Innovation: This comprises relatively small modifications to pre-existing solutions (Scheepers, 2007). In the view of Henderson and Clark (1990) in Hager (2006), this type of innovation improves and extends an established design. Improvement takes place in individual components, but the basic core design concepts and the linkage between them remain the same. An example is faster spinning hard drives. Modular Innovation: This kind of innovation changes the core design of one or more components but does not change the entire product architecture. This type of innovation requires new knowledge for one or more components, but the architectural knowledge remains the same. A good example is the digital phone which replaced the analog phone, without changing the phone itself (Henderson and Clark, 1990 in Hager, 2006). Architectural Innovation: The essence of this type of innovation is the reconfiguration of an established system to link together components and parts in a new way (Henderson and Clark, 1990 in Hager, 2006). According to the authors, architectural innovation does not mean that the components remain unchanged but they are changed in a manner that there are new ways of linkage between the components. The change is so small that the core concept behind the changed component is the same, and the associated scientific and engineering knowledge remain the same. An example is the technologies where architectural innovations reduced the size of the hard drives from 14-inches diameter disks to diameter of 3.5-inches, and from 2.5-inches to 1.8-inches. 23 Radical Innovation: This type of innovation brings about a new dominant design and consequently, a new set of core design concepts embodied in components that are linked together in a new architecture (Hager, 2006). Radical innovation leads to new solutions that address customer needs (Morris and Kuratko, 2002 in Scheepers, 2007). In the view of O’Connor and Ayers (2005) in Lassen (2007), radical innovation is the commercialisation of products or technologies that have a strong impact on the market, in terms of offering wholly new benefits; and the firms, in terms of generating new business. Moore (2004) also gives the following taxonomy of innovation: Disruptive Innovation: Gets a great deal of attention, particularly in the press, because markets appear as if from nowhere, creating massive new sources of wealth. It tends to have its roots in technological discontinuities, such as the one that enabled Motorola’s rise to prominence with the first generation of cell phones. Application Innovation: Takes existing technologies into new markets to serve new purposes. Product Innovation: Takes established offers in established markets to the next level, as when Intel releases a new processor or Toyota a new car. The focus can be on performance increase, cost reduction, usability improvement or any other product enhancement. Process Innovation: Makes processes for established offers in established markets more effective or efficient. Examples include Dell’s streamlining of its PC supply chain and order fulfillment systems. Experiential Innovation: Makes surface modifications that improve customer’s experience of established products or processes. These can take the form of delighters (“You’ve got mail!”), satisfiers (superior line management at Disneyland), or reassures (package tracking from FedEx). Marketing Innovation: Improves customer-touching processes be they marketing communications or consumer transactions Business Model Innovation: Reframes an established value proposition to the customer or a company’s established role in the value chain or both. Examples include IBM’s shift to on- demand computing, and Apple’s expansion into consumer retailing. Structural Innovation: Capitalizes on disruption to restructure industry relationships. Innovators like banks, for example, that have used the deregulation of financial services to consumers under one umbrella. 2.6.2 Phases in Successful Innovation Desouza, Dombrowski, Awazu, Baloh, Papagari, Kim, and Jha, (2007) identify the following five essential phases of successful innovation: Idea Generation and Mobilisation This phase is the starting point for new ideas. Successful idea generation should be stimulated by the pressure to compete and by the freedom to explore. Once a new idea is 24 generated, it is conveyed to the mobilization phase, wherein the idea travels to a different physical or logical location. Because most inventors are not also marketers, a new idea often needs someone other than its originator to move it along. This phase is crucially important to the progression of a new idea, and omitting it can delay or even sabotage the innovation process (Desouza et al., 2007). Advocacy and Screening According to the authors, this phase is the period for weighing an idea’s costs and benefits. Advocacy and screening have to take place simultaneously to weed out ideas that lack potential without allowing stakeholders to reject ideas impulsively solely on the basis of their novelty. Firms will have more success when the evaluation process is transparent and standardized, because employees feel more comfortable contributing when they could anticipate how their ideas would be judged. Experimentation The experimentation phase assesses the sustainability of ideas for a particular firm at a particular time – and in a particular environment. In this phase, it is essential to determine who the customer will be and what he or she will use the innovation for. With that in mind, the firm might discover that although someone has a great idea, it is ahead of its time or just not right for a particular market. However, it is important not to interpret these kinds of discoveries as failures – they could actually be the catalysts of new and better ideas (Desouza et al., (2007). Commercialisation In this phase, the firm should look to its customers to verify that innovation actually solves their problems and then should analyse the costs and benefits of rolling out the innovation. According to the Desouza et al (2007), an invention is only considered an innovation once it has been commercialised. Therefore, the commercialisation phase is a significant one similar to advocacy in that it takes the right people to progress the idea to the next developmental phase. Diffusion and Implementation According to the authors, diffusion is the process of gaining final, company overall acceptance of an innovation. Implementation is the process of setting up the structures, maintenance and resources needed to produce it. According to Loewe and Dominiquini (2006), good innovation processes share the following characteristics: Allow divergence and exploration at the front end. This helps ensure that the new ideas generated are not simply a repeat of what has been done before. Synthesize individual ideas into bigger platforms before selecti ng individual ideas to develop further. This enables the company to avoid "gambling the farm" on one idea without first learning about the larger opportunities at hand. o How can one be innovative?  One can become innovative throug

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