THEORIES OF ENTREPRENEURSHIP: THE END OF THE HEROIC ENTREPRENEUR

1. THEORIES OF ENTREPRENEURSHIP: THE END OF THE HEROIC ENTREPRENEUR JEAN CLARKE LEEDS UNIVERSITY BUSINESS SCHOOL

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

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

4. ENTREPRENEURSHIP: PERSONALITY OR PROCESS? • Created: • Virgin music label • Virgin Atlantic Airways • Virgin Cola • Virgin Mega Stores SPECIAL PERSONALITY? or EFFECTIVE ACTIVITIES?

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

6. ENTREPRENEURSHIP IN UK: SOME BACKGROUNDGlobal Entrepreneurship Monitor (2005 ) • UK has one of the most manageable administrative regimes for start-up in EU - register within a day • Region with the highest level of independent start-ups is London (8.3% of adult population), lowest is the North East • Business Angel activity is highest in London & South East • London has a substantially higher proportion of the regional population expecting to start a business over the next 3 years (14.9%) • Respondents in South East are most positive about start-up opportunities – 46.5%

7. 12 10 8 East 6 TEA rate (%) UK Avg 4 2 0 2002 2003 2004 2002 2003 2004 Male Female TOTAL ENTREPRENEURIAL ACTIVITY BY GENDERSource: Global Entrepreneurship Monitor 2005

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

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

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

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

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

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

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

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

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

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

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

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

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