ENT | 4
Entrepreneurship Part 4 - ENT as a Process
Welcome back! In part 4 of the series about entrepreneurship we will have a look on entrepreneurship as a process.
In the field of research entrepreneurship is concerned with the following questions:
Who recoginzes entrepreneurial opportunities?
How and when does the process of opportunity recognition happen?
Entrepreneurship as a field is hence closely related to economics, strategic management, sociology, psychology, historical research, anthropology et al.
When we think about a model of the entrepreneurial process it will look something like this:
Model of entrepreneurial process.
So lets think about the model of venture creation
A model of value creation.
The creation of a new venture to exploit an entrepreneurial opportunity is more likely when:
there are a few incentives for an individual to exploit the opportunity within an existing organization
incumbent firms in an industry can not achieve high levels of economies of scale and scope
there are low entry barriers in an industry
Alternative ways to make use of an opportunity could be a management buy-in (MBI) or management buy-out (MBO), the foundation of a joint venture, or a selling of user rights or license.
Values
Readiness for change, or at least the willingness to live with it, is essential of a society is to create wealth and value for its population.
Politics
At a macro level, politics provide a framework for entrepreneurship by organizing a society. However, if chaos impedes entrepreneurship, conversely too much order is just as bad. Successful societies create and manage a tension between order and chaos.
Economic Institutions
Institutions like property rights, stock exchanges, banks, courts, laws of contract et al. are tools used by entrepreneurs to capitalize on opportunities and convert those opportunities into marketable services and products.
This brings us to the question: What are the reasons for new venture creations?
1 Desire for autonomy
Entrepreneurs want to be independent, possibly work at location of their choice and be their own boss.
2 Material rewards
Entrepreneurs want to be rewarded according to their efforts and because of the anticipated financial gains.
3 Creativity
Many entrepreneurs want to take advantage of their own talents, to create something new and to realize their desire to bring something new into existence.
But there are also some reasons that speak against new venture creations:
1 Lack of resources
Many potential entrepreneurs think that they lack competencies in management or marketing. They also have to face the liability of newness and the problems to find sufficient finance.
2 Compliance costs
High taxes and the costs of complying with government legislation are perceived as a major hurdle.
3 Hard reality
The process of venture creation is often harder and riskier than initially expected. The future is perceived as very uncertain and, as a result, a certain fear of failure emerges over while the would-be entrepreneur gathers resources and processes information to launch the venture.
Once this is done we want to show some relevant performance measures:
Relevant performance measures
Hope you enjoyed the read. Next in line will be finding the right growth rate including an entrepreneur’s guide to the big issues.
