Innovation & Entrepreneurship.pptx
- 2. Recommended resources Innovation and Entrepreneurship by Peter F. Drucker, Publisher: Perfect Bound Innovation and Entrepreneurship by John Bessant- John R. Bessant- Joe Tidd, Publisher: Wiley Innovation and Entrepreneurship_ Theory, Policy and Practice by Elias G. Carayannis, Elpida T. Samara, Yannis L. Bakouros, Publisher: Springer December 23, 2022 2
- 3. DEFINITIONS Innovation “Creating value out of existing resources” A specific tool of entrepreneurship. They go hand in hand! Entrepreneurship “Shift of economic resources out of an area of lower to higher productivity of greater yield” JB Say 1800 December 23, 2022 3
- 5. TROPICAL FLOW • Imagina tion • Wish IDEA • Feasibility • Creativity INVENTIO N • Visibilit y • Entrepr eneursh ip INNOVATIO N • Desirable • Leadership BUISNE SS December 23, 2022 5
- 6. ENTREPRENEUR The term is derived from the French word “entreprendre” which means “to undertake”. It was first brought up by Richard Cantillon, a French baker in 18th Century to mean, “A person who is uncertainty bearer”. Richard Cantillon was the first person who used the term entrepreneur for economic activities. J.B.Say another Frenchman, expanded Cantillon’s ideas and said that entrepreneur is “an organizer who combines various factors of production to produce a socially viable product”. December 23, 2022 6
- 8. Cont. Thus, the fact remains that the term “entrepreneur” has been defined differently by different writers and thinkers. These views expressed above are broadly classified into three groups, namely: Risk-bearer Organizer, and Innovator December 23, 2022 8
- 9. CONT. Both the concepts aim at economic growth and sustainable development, Entrepreneurs have been recognized as an important source of economic growth, They create jobs, Play a pivotal role in the development country’s economy. December 23, 2022 9
- 10. Evolution of the Concept of Entrepreneur The term entrepreneur is as old as civilization. It has been in use for the last five centuries. In early 16th Century it was referred to persons engaged in military expeditions, During 17th Century it was extended to persons engaged in engineering activities like construction etc. and, In the beginning of 18th Century it was used to refer to persons engaged in economic aspects of human activities. December 23, 2022 10
- 11. Role of Entrepreneur December 23, 2022 11
- 12. Characteristics of Successful Entrepreneurs Innovator: Entrepreneurs are generally regarded as innovators. They introduce new methods, new products, new markets, new sources of raw material and new forms of industrial units. According to Schumpeter entrepreneur is basically an innovator who carries out new combinations of factors of production to initiate and accelerate the process of economic development. Risk Taker: Entrepreneur assumes the risk of the business. It is the condition of not knowing the outcome of a decision or activity. December 23, 2022 12
- 13. Cont. Good Organiser: Entrepreneurs have remarkable skills in organising work and people. They make objective selection of individuals in conformity with their skill in solving specific problem. They bring together various factors of production, minimize losses and reduce the cost of production. Optimistic: The successful entrepreneurs have a positive approach toward things. They become optimistic for future that the situations will become favourable to business in future. Foresight: The entrepreneurs have a good foresight to know about future business environment. In other words, they well visualize the likely changes to take place in market, consumer attitude and taste, technological developments etc. and take necessary and timely actions accordingly. December 23, 2022 13
- 14. Cont. Visionary: Vision is the ability to see the end result of goals while striving to achieve them. With persistence and determination, the entrepreneur develops strategies to change the vision into reality. Self-Confident: An entrepreneur should be self confident. He must have faith in himself and in his abilities. He should have ability to tackle the problems independently with confidence. Perseverance: One of the qualities of successful entrepreneurs is that they possess and exhibit tremendous perseverance in their pursuits. They do not give up their effort even if they fail. They make hard efforts to get rid of obstacles coming in the way of reaching the ultimate goal. Emotional Balance: There are many ups and downs in the business but entrepreneur has to be emotionally stable. They do not get carried away by the huge profits and disappointed by the huge losses. They remain quiet and calm at every situation. December 23, 2022 14
- 15. Cont. Hard Work: Entrepreneurs works very hard to succeed. Most of entrepreneurs work hard in the beginning and thus same becomes their habit for the lifetime because they believe that hard work is the key to success. Decision Maker: An entrepreneur has to take various decisions in performing activities of his enterprise. The true entrepreneurship requires creative decision making, rational approach, problem solving ability and ability to take quick and correct decision. The profitability and productivity of an enterprise directly depends upon the decision making capacity of an entrepreneur. Patient: Entrepreneurs are highly patient and do not get affected by the temporary failure and continue to work hard. Creative: An entrepreneur must have the qualities of creative thinker. He must be reasonably intelligent and should have creative thinking so that he must be able to solve various problems and handle the critical situations in order to deal with them. December 23, 2022 15
- 16. Cont. Leadership and Team Spirit: An entrepreneur must have the ability to build successful teams and thus working in teams. Leadership quality is the most important characteristic of entrepreneur. It is the process of influencing and supporting others to work enthusiastically towards achieving objectives. Interpersonal Skills: An entrepreneur is a person who comes across with different persons. He has to deal with many types of persons. He is the person who gets the things done through with the help of others. So a successful entrepreneur possesses the interpersonal skills of dealing with people. Communication Skills: Entrepreneurs are good communicator and with their good communication skills they are able to convince others with their ideas. An entrepreneur who can effectively communicate with customers, employees, suppliers and creditors will be more likely to succeed. December 23, 2022 16
- 17. Technological Innovation (Innovation in Entrepreneurship) Innovation in Entrepreneur plays a role in many ways like in: Creative Development Persistent Improvement Reinforcing Your Brand Making the best of your existing products Responding to Trends and Competition Having a Unique Selling Point The Use of Social Media December 23, 2022 17
- 18. Theories of Entrepreneurship The concept of entrepreneurship is as old as civilization while the theories of entrepreneurship have evolved from over a period of more than two centuries. The theories of entrepreneurship can be explained from “economists”, “psychologists” and “socialists” viewpoint, which are developed over a period of time. December 23, 2022 18
- 19. Innovation Theory by Schumpeter According to Schumpeter, innovation is the key factor in entrepreneurship in addition to risk and organizing function. Schumpeter is the first major theorist to place the human at the centre of the process of economic development. Entrepreneurship as a “creative activity” and this creation may be in the form of- December 23, 2022 19
- 20. December 23, 2022 20 Introduction of new product with which customer is not familiar or introduction of new quality of the existing product. Use of new method of production which is not yet tested Opening of new market in which particular manufacturer of the country has not yet entered New form of organization Conquest of new source of supplying raw material
- 21. Cont... Schumpeter is very clear about the economic function of the entrepreneur. According to him, entrepreneur is the major mover in economic development with his function, to innovate or bring out new combinations. It can be noted that this theory’s main figure, the “innovating entrepreneur” has played an important role in the rise of modern capitalism. The entrepreneur has been the prime mover - for economic development process. December 23, 2022 21
- 22. CRITICISM This theory seems to be one sided as it put extreme stress on entrepreneurship only and ignores the other functions of the entrepreneurship. Applicability and success of this theory becomes doubtful in under developed country. December 23, 2022 22
- 23. Theory of High Achievement by McClelland This theory is regarded as the most important psychological theory. McClelland wanted to find the internal factors that motivate people to take opportunity of the trade. According to McClelland, a person attains three types of needs as an outcome of one’s life knowledge. Three needs are: Need for Achievement: A drive to excel, advance and grow. Need for Power: A drive to dominate or influence others and situations. Need for Affiliation: A drive for friendly and close inter-personal relationships. December 23, 2022 23
- 24. The definite characteristics of a high achiever (entrepreneur) can be listed as follows: (i) They lay down moderate realistic and achievable goals for them. (ii) They take planned risks. (iii) They favor situations wherein they can get individual responsibility for solving problems. (iv) They need actual feedback on how well they are doing. (v) Their need for achievement live not only for the sake of economic rewards or social recognition rather personal achievement is essentially more satisfying to them. December 23, 2022 24
- 25. Leibenstein’s X-Efficiency Theory The theory was introduced by Harvey Leibenstein in his paper Allocative efficiency v. "x-efficiency" in American Economic Review 1966. X-Efficiency is the degree of inefficiency in the use of resources within the firm, it measures the extent to which the firm fails to realise its productive potential. When the input is not used efficiently then the difference between the actual output and the maximum attainable output is the X-efficiency. X efficiency occurs if resources are wasted or not used at all. December 23, 2022 25
- 26. Cont. Therefore, leibenstein identifies two roles for the entrepreneur: gap filler and an input completer. December 23, 2022 26 Imperfect competition/not well established market Gap filler role of entrepreneur Fill the gap in imperfect market to put the enterprise in motion Input completer role of entrepreneur Transforming available inputs that improve the efficiency of the existing production method Leibenstein X- efficiency Theory
- 27. Cont. According to leibenstein there are two types of entrepreneurship. (i) Routine entrepreneurship – deals with normal business functions like co-ordinating the business activities. (ii) Innovative entrepreneurship – wherein an entrepreneur is innovative in his approach. It includes the activities necessary to create an enterprise where not all the markets are well- established or clearly defined. December 23, 2022 27
- 28. Risk bearing theory of Knight According to Knight, the most important feature of entrepreneurship is Risk bearing. December 23, 2022 28
- 29. Important Features Of The Theory December 23, 2022 29 Risk Creates profit: As entrepreneur bears risk, therefore he earns profit. More Risk more Gain: Entrepreneurs face different types of risks according to their ability and interests. This theory states that more the risk more will be the returns. Profit as Reward and cost: Profit is the reward of bearing risk. Therefore, it is also called as normal cost of production. Entrepreneur’s income is uncertain: According to knight, uncertainty is the important element of entrepreneurship. There are two types of the risk: insurable and non-insurable. Entrepreneur earns profit because he bears non- insurable risk which is uncertain.
- 30. Max Weber’s theory of entrepreneurial growth Max Weber believes that religion has a large impact on the entrepreneurial development of the country because some religion has basic faith to earn more money whereas some has less. It is the religious beliefs that develop the sense of capitalism in the individual which generates the feeling of occupational chase and the addition of assets. December 23, 2022 30
- 31. Cont. This theory states that Hinduism, Buddhism and Islam do not encourage entrepreneurship which was criticized by various sociologists. December 23, 2022 31
- 32. Cont. This theory was criticized by many researchers, as it was based on the invalid assumptions like: There is a single system of Hindu value. The Indian people learn those values and translate them to their every day behaviour, and These values remained resistant to and protected against external pressures and change. The quick growth of entrepreneurship in India since independence shows that Hinduism is not averse to the spirit of capitalism and to adventurous spirit but some researchers has accepted this theory but it was not universally accepted. December 23, 2022 32
- 33. Thomas Cochran’s Theory of Cultural Values According to him, entrepreneurs are not super normal powers but are the role models of the society. The key magnitude in this theory is cultural values, role expectations and social sanctions. December 23, 2022 33
- 34. Cont. Entrepreneur’s performance is influenced by the three factors: own attitudes towards his occupation, the role expectations held by sanctioning groups, and the operational requirements of the job. Society’s values are the main determinant of the first two factors and the changes over the time in different variables like population; technology etc. will impose change in role expectations by generating new operational needs. December 23, 2022 34
- 35. Theory of Change in Group Level Pattern This theory of change is propounded by Young. He conducted a Thematic apperception Test (TAT) on group of entrepreneurs. This test revealed that entrepreneurs has the ability to define the solution to the problem, awareness of the efforts required, confidence in their own ability and ability to analyse the situation before decision making. Young’s theory is a theory of change based on society’s incorporation of reactive subgroups. December 23, 2022 35
- 36. Cont. A group becomes reactive when the following three conditions coincide: When the group has better institutional resources than the other groups of the society at the same level When the group experiences low status respect. When deprived of access to important social networks. December 23, 2022 36
- 37. Economic theory of Entrepreneurship This theory was propounded by Papanek and Harris. According to them if economic incentives are available in the country then there will be entrepreneurship. Economists believe that entrepreneurship and economic growth exists where economic conditions are favourable to the business environment. December 23, 2022 37
- 38. Cont. There are large numbers of economic factors which helps in upgrade or degrade entrepreneurship in a country. Following are the factors: (a) The availability of bank credit (b) High capital formation with a good flow of savings and investments (c) Supply for loanable funds with a lower rate of interest. (d) Increased demand for consumer goods and services (e) Availability of productive resources. (f) Efficient economic policies like fiscal and monetary policies (g) Communication and transportation facilities December 23, 2022 38
- 39. Exposure Theory of Entrepreneurship This theory states that exposure to new ideas and opportunities leads to innovation and creativity thus creates a new enterprise. An Individual’s education, cultural values, motivation, economic factors, need for achievement, religious beliefs and risk bearing capacity helps in exposing him/her towards the new ideas and opportunities and thus leading to innovation and creativity. Innovation is the most important factor entrepreneurship. December 23, 2022 39
- 40. Political System Theory of Entrepreneurial Growth This theory states that favourable political environment has an impact on the entrepreneurial growth because stable political system creates infrastructure, promotes policies and encourage people towards entrepreneurship. Commitment in the political system creates a favourable business environment and enhances creative and entrepreneurial ability which leads to the entrepreneurial growth in the country. December 23, 2022 40
- 42. Hagen’s theory of entrepreneurship Hagen’s has propounded a theory of withdrawal of status respect. According to him, withdrawal of status respect leads to the entrepreneurship. He proposed four events which can lead to status withdrawal: Displacement of a conventional best group from its earlier status by another conventional supply physical force. Defamation of valued symbols through some change in the attitude of the superior group Inconsistency of status symbols with a changing’ distribution of economic power. Acceptance of expected status on migration to a new society. December 23, 2022 42
- 43. Cont. He further stated that withdrawal of the status respect would give rise to following: a) Innovator: An entrepreneur who is innovative and try to attain his objectives set by himself b)Retreatist: Entrepreneur who keeps on working in society but remains apathetic to his work or status. (c)Ritualist: One who works as per the rules of the society but has no hope in the improvement in his status. (d)Reformist: One who is a revolting and tries to carry new ways of working and develops new society. December 23, 2022 43
- 46. The Entrepreneurial Process December 23, 2022 46
- 47. Ideation & Opportunity Identification OPPORTUNITY TO START A BUSINESS- The ability to identify business opportunities is an essential characteristic of an entrepreneur. Opportunity- Is a favourable position or a range for advancement. December 23, 2022 47
- 48. STEPS TO ARRIVE AT BUSINESS OPPORTUNITY • Generating Idea • Screening Process • Formulating the concept of the business December 23, 2022 48
- 49. GENERATING IDEAS Scan and Understanding the needs & wants of the people. Abraham Maslow- psychologist People generally have different kinds of basic needs such as food, clothing and shelter, safety, socialization, recognition for self-esteem & self-fulfillment. Taking macro-perspective or viewing larger environment where business will be situated. December 23, 2022 49
- 50. Looking at the market closely Demand & Supply gap analysis Import-Export Movement Product Substitution Forward-Backward Industry Linkages December 23, 2022 50
- 51. Ways of Scanning the Environment Looking at People’s skill- Observe your community Looking at available business assistance program- Visit Department of Trade and Industry, Government & Private Institutions, Non-Governmental Organizations. December 23, 2022 51 Collecting Information Ad-Hoc Scanning (short term, intermittenly) Regular scanning (studies done on regular basis) Continuous scanning (continuous collection & processing of data on wide range of factors)
- 52. Means of Collecting Information Accessing Networks Public Meetings, Trade Fair Publications, Key People Surveys, Focused Group Discussion In-Depth Interviews December 23, 2022 52 Screening Process Personal Level Screening Firm-Level Screening
- 53. Screening Process Personal Level Screening Personal Preference (committed) Educational & Training Background Work Experience (degree of expertise & knowledge) Business Network & Contracts (Buyers, Suppliers or Creditors) Family Support Personal- Level Screening Screening Process December 23, 2022 53
- 54. Cont. Firm-Level Screening Market Technology Availability of Skills Availability of Raw Materials Financial/Capital Requirement Profitability Government Support Screening Process December 23, 2022 54
- 55. Formulating the Concept of the Business Resources Money Materials Machines Manpower Methods Moment Management The resource analysis where strengths & weaknesses are identified, indicates what the firm is capable of doing at the start of the business. The strengths identify distinctive competencies of the company which can December 23, 2022 55