Enterprise & Innovation Topic 1: Entrepreneurship Social & Economic Process Professor Tim Mazzarol UWA Business School E&I MGMT5608 I&E MKTG5503 UWA Business School MBA Program Master of Biotech tim.mazzarol@uwa.edu.au
Learning outcomes In this topic you should learn how to: Understand the causes of small business failure. Examine causes and danger signals of impending trouble. Understand the characteristics of poorly performing firms. Review turnaround strategies for small firms and apply the principles to a case study. Mazzarol 2017 2015 all rights reserved
Case study: SMEs in the APEC Region Individually read the case studies of SMEs in the APEC region In groups address the questions What do these cases highlight about entrepreneurship and innovation in the Asia-Pacific Region? Report your group s findings
Lessons from the cases Entrepreneurial leadership is the key to new venture creation Focus on the customer s needs Find a niche & develop strategic networks Take advantage of government support & managerial training Embrace new technologies in particular ICT to access global markets Think big & look beyond regional borders
What is entrepreneurship? Nobody talks about entrepreneurship as survival, but that s exactly what it is and what nurtures creative thinking.
What is entrepreneurship?
Definition of terms Enterprise attributes achievement driven, creative, desire for autonomy, risk taking ability, persistent Enterprise Application of enterprise attributes Entrepreneur Someone who demonstrates a marked use of enterprise attributes usually in commerce or business Small Business Independent, owner-managed venture usually with less than 20 employees Intrapreneur Someone who demonstrates a marked use of enterprising attributes within a large organization Innovation Means by which one either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth Source: Gibb, 1988; Drucker, 1985
The economic and social benefits of entrepreneurship Entrepreneurs make a positive contribution to economic growth Major source of new job opportunities: 1980-2005 nearly all net job creation in the USA within small firms. 2007 more than 75% of all net new jobs created in small firms. Major source of new innovations: 67% of inventions & 95% of radical inventions in US since 1945 attributed to SMEs SMEs generate 13 times more patents per employee than larger firms & comprise one-third of all companies in possession of 15 or more patents Replacement for lost corporate sector jobs: 45% of EU & 67% of US citizens prefer self-employment 4½% of EU & 13% of US population engaged in new business venture activities Sources: GEM (2002); Kuratko & Hodgetts (2004), OECD 2010; Haltiwanger et al 2009)
The importance of entrepreneurship and innovation to national economies Policies to strengthen entrepreneurship and increase the innovation capabilities of SMEs should be one of the main planks of government innovation strategies. Furthermore, government should target SMEs and entrepreneurship as a major potential source of new jobs in the recovery from recession (OECD 2010).
Three things entrepreneurs do
Discussion Why is entrepreneurship important to our economy?
What is an entrepreneur? Characteristics: Agent of change new innovations Individual motivation identifies & pursues opportunities Converts opportunities manages change & risk New Venture Creator builds teams & organizations Entrepreneurial Traits: Opportunistic; Creative; Visionary; Optimistic; Innovative; Resourceful; Independent of thought; Willing to take calculated risks; Leadership skills
Key roles played by entrepreneurs in the economy Disruptor Create change via new products and innovation Opportunity Identification Alert to new ideas and trends Risk Taker Willing to take on risk due to capacity to deal with uncertainty and ambiguity Resource Shifter Enhance productivity via finding new ways to configure resources Breakthrough Innovator Lead introduction of new technologies and marketing ideas Source: OECD 2010
Defining entrepreneurship Entrepreneurship is a process of innovation and new venture creation along four dimensions: Individual Organizational Environmental Process Supported by collaborative networks across government, education and institutions. Capturing opportunities and converting them into marketable propositions Source: Kuratko & Hodgetts, 2000
Global trends in entrepreneurship and innovation Shift from a managed to an entrepreneurial economy Rise of the knowledge economy Strategically networked innovation Globalisation Low, mid and high tech innovation Social entrepreneurship and innovation Source: OECD 2010
The Global Entrepreneurship Monitor The GEM project involves an annual survey of entrepreneurship activity in 54 countries Factor-Driven Economies (e.g. Algeria, Iran, Pakistan) Efficiency-Driven Economies (e.g. Argentina, China, Malaysia) Innovation-Driven Economies (e.g. Australia, Japan, USA) Source: GEM Global Report (2011)
Entrepreneurial attributes and perceptions in 60 GEM countries in 2015 70 60 50 40 30 20 10 0 factor driven efficency driven innovation driven factor driven efficency driven innovation driven factor driven efficency driven innovation driven factor driven efficency driven innovation driven percentage of adult population Perceived opportunity Perceived capablility Fear of failure Entreprenurial intention Self-perception about Entrepreneurship Around 33% to 39% of people across all economies hold a fear of failure as a potential barrier to new venture creation. Source: Kelly, Singer & Herrington, 2016
GEM 2016 Australia s performance Factor Perceived opportunities Perceived capabilities Fear of failure Entrepreneurial intentions Total early-stage entrepreneurial activity Established ownership rate Opportunity vs. Necessity motivation Female/Male TEA ratio High status to entrepreneurs Entrepreneurship a good career choice Rank/60 18 th 31 st 46 th 37 th 24 th 20 th 5 th 21 st 21 st 36 th Source: Kelly, Singer & Herrington, 2016
GEM 2016 Australia s performance Source: Kelly, Singer & Herrington, 2016
The entrepreneurial roller coaster
Discussion How do entrepreneurs do what they do?
Entrepreneurial behaviour Realising Opportunities Evaluating self Entrepreneurial Behaviour Acting and Managing Realising the need for change Source: Cunningham and Lischeron 1990
Who is the entrepreneur? High Inventor Entrepreneur Creativity & Innovation Promoter Manager Administrator Low General management skills, business know-how & networks Source: Timmons, 1999 High
Managers, entrepreneurs and entrepreneurial managers Entrepreneurial Management Corporate Management Growth by green-field management Short-term vision Informal strategic planning Growth by acquisition Long-term vision Formal strategic planning Failure means missed opportunities Seeks incremental change to lower risk Pursues action strategies when needed Failure means resource control problems Seeks large scale change using analysis Pursues prenegotiation strategies Evaluates when tasks are completed Status is measured by market success Avoids overheads by sub-contracting Evaluates at regular intervals Status measured by resource control Seeks to control all resources for power Pursues effectiveness in marketplace Pursues efficiency information to justify control Source: Gibb, 1988
The entrepreneurship domain Source: Brush et al (2003)
Success in new ventures Ownership Incremental growth Independence Flexibility Commitment Business Success Control & Coordination Strategic Awareness Holistic management Learning by doing Market linked rewards Source: Gibb 1988
Creating an enterprise culture Positive image of successful entrepreneurs Opportunity to practice entrepreneurship with support Enterprise Culture Familiarisation with SME management Knowledge of entrepreneurial management Network of family & independent contact supporting market entry Source: Gibb 1988
Entrepreneurial innovation
Types of innovation Product Process Small Incremental Incremental product change Learning by doing Synthetic Dominant designs DC-3, Boeing 707, IBM 360 Major process improvements Rotary kiln in cement manufacturing Discontinuous Vacuum tubes to transistors Piston to jet engines Individual wafer to planar process in semiconductor Float-glass process Substantial Learning Source: Tushman & Nadler (1986)
Types of innovation over product lifecycles Mature Growth Emergence Dominant design Product/Process Substitution Dominant Major Product Major Process Minor Product Major Product innovation types Minor Process Minor Product Minor Process Minor Process Learning requirements High High LOW High Source: Tushman & Nadler (1986)
Typology of innovation Invention Extension Duplication Synthesis Totally new product or service Aircraft Wright Brothers Light Bulb Edison Telephone A.G. Bell New use of existing product or service McDonalds R. Kroc Atari Bushnell Holiday Inn - Wilson Creative replication of existing concept Wal Mart Pizza Hut Combination of existing concepts into new use Federal Express Merrill Lynch Source: Kuratko and Hodgetts 2004
Sources of innovation Unexpected occurrences Requiring new problem solutions Incongruities Ability to find a niche within established markets Process needs Matching & blending existing technologies/systems Industry & Market Changes Changing the way people do business or behave Demographic Changes Adapting to aging populations or family structures Changes in perception Lifestyle and cultural changes or fashion image changes New Knowledge Scientific and technological breakthroughs Source: Drucker 1985
Magic sauce
Entrepreneurial ecosystems Government Policy Local & Global Markets Regulatory Framework & Infrastructure Human Capital & Workforce Funding & Finance Education & Training Culture Universities as Catalysts Mentors, Advisors & Support Systems Source: Mazzarol (2014)
Entrepreneurial ecosystems recommendations for government policy Effective government policy for entrepreneurial ecosystems requires the active involvement of government ministers working with senior public servants who act as institutional entrepreneurs to shape and empower policies and programs. Policy should be developed that is holistic and encompasses all components of the ecosystem rather than seeking to cherry pick areas of special interest. Build from existing industries that have formed naturally within the region or country rather than seeking to generate new industries from green fields sites. Adopt a top down and bottom up approach devolving responsibility to local and regional authorities. Recognise that small business policy is transactional while entrepreneurship policy is relational in nature. Source: Mazzarol (2014)
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