LECTURE ONE

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Learning Outcomes
 To introduce the concept and nature of
entrepreneurship
 To understand the role of Importance of
Entrepreneurship in personal and economic
development
 To develop the notion that entrepreneurs learn to be
cognitively adaptable.
 To introduce effectuation as a way that expert
entrepreneurs sometimes think.

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Learning Outcomes Cont’d
 To acknowledge that some entrepreneurs experience
failure and to recognize the process by which they
maximize their ability to learn from that experience.

 To recognize that entrepreneurs have an important

economic impact an ethical and social responsibility.

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Introduction and fundamental
concepts
 Entrepreneurship is the process of creating something
new with value by devoting the necessary time and
effort, assuming the accompanying financial, psychic,
and social risks, and receiving the resulting rewards of
monetary and personal satisfaction and
independence.

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The Entrepreneur
 The word entrepreneur is derived from the French
word “entreprendre" which means “to undertake” i.e.
individuals who undertake the risk of a new enterprise.
 The word entrepreneur therefore, first appeared in
the French language in the beginning of the 16th
century.
 The word was also applied to the leaders of military
expedition.
 Richard Cantillon, an Irishman, living in France first
used the term entrepreneur to refer to economic
activities.
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Definitions
 Cantillon, definition emphasizes an entrepreneur as
a bearer of risk which is non-insurable.
 International Labour Organisation (ILO) defines
entrepreneurs as those people who have the ability to
see and evaluate business opportunities, together with
the necessary resources to take advantage of them and
to initiate appropriate action to ensure success.
 David McClelland (1961) described the entrepreneur as
primarily motivated by an overwhelming need for
achievement and strong urge to build.
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definitions CONT’D
 David McClelland (1961) described the entrepreneur as
primarily motivated by an overwhelming need for
achievement and strong urge to build.
 Collins and Moore (1970) studied 150 entrepreneur and
concluded that they are tough, pragmatic people
driven by needs of independence and achievement.
They seldom are willing to submit to authority.
 Bird (1992) sees entrepreneurs as mercurial, that is,
prone to insights, brainstorms, deceptions,
ingeniousness and resourcefulness; they are cunning,
opportunistic, creative and unsentimental.
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Definitions cont’d.
 After reviewing the evolution of entrepreneurship and
examining its varying definitions, Robert C. Ronstadt
put together a summary description saying:
 Entrepreneurship is the dynamic process of creating
incremental wealth. This wealth is created by
individuals who assume the major risks in terms of
equity, time, and/or career commitment of providing
value for some product or service. The product or
service itself may or may not be new or unique but
value must somehow be infused by the entrepreneur by
securing and allocating the necessary skills and
resources.
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Nature of entrepreneurship
 Entrepreneurship has been viewed from a number of
perspectives as follows:
 A Science Based on facts , involved in testing and
experimenting, largely Quantitative and largely
abstract and builds on Ceteris paribus i.e assumes
things held constant.
 An Art –Based on judgment , value, involved in logic,
largely qualitative and largely real.
 Theory –A set of logically linked , high order
generalisations. Through prediction and explanation.

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Nature
 Practice-Is usually contrasted with theory. Peter F .
Drucker asserts that, “Every practice rests on Theory,
even if the practitioners themselves are unaware of it.
Entrepreneurship rests on the theory of economy and
society.”
 A process-Joseph Schumpeter provided a framework. A
dynamic process of organizing resources to create
incremental wealth.
 A discipline- That teaches the theory , skills and
attitudes needed in the venture creation and
management process.

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entrepreneur concept
evolution
 According to Hisrich, Peters and Shepherd (20o9), the
concept of entrepreneurship has evolved from a risk
taker to one who innovates.
 The concept of the entrepreneur as a risk taker evolved
through the following phases:
 a)Earliest Period
 b) Middle Ages
 c) 17th Century
 d)18th Century
 e)19th Century and f) 20th century
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Other concepts
 TECHNOLOGICAL INNOVATION
 DISCOVERY
 INVENTION
 RE-INVENTION
-INNOVATION -Ideas applied successfully, production,
improving, changing ,modifying
-TECHNOLOGY DIFFUSION -Means becoming known
to others e.g. the spread of an innovation or invention
through the industry or economy to many users. It is a
one to many or many to many process.
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Types of entrepreneurs
C. Danhof has broadly classified entrepreneurs into four
types. These are discussed below.
 1. Innovative Entrepreneur
 2. Imitative Entrepreneur:
 3. Fabian Entrepreneurs
 4. Drone Entrepreneurs
 above types of entrepreneurs is not comprehensive for
it aims at highlighting the broad range of
entrepreneurs found in business and profession.

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Types of entre cont’d
 According to the Type of Business -Depending on
the nature size, type of business, entrepreneurs are
divided into FIVE categories. They are as follows :
1.Business Entrepreneur
2.Trading Entrepreneur
3. Industrial Entrepreneur
4. Corporate Entrepreneur
5. Agricultural Entrepreneur
* Assignment -other types by Use of Technology,
motivation, Growths and stages of development.
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Characteristics of an
entrepreneurship BWISA
 Energetic
 Novelty-oriented
 Tolerant
 Result Oriented
 Enterprising
 Profit –Oriented
 Resourceful
 Efficiency

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Characteristics cont’d
 Networking
 Envisages
 Unstoppable
 Risk-loving
 Self-confident
 Five D formula success –Desire,Diligence,Details,
Discipline, and Determination

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Nature of entrepreneurship
Entrepreneurship has been viewed from a number of
perspectives as follows:
a)Theory
b)A practice
c)A science
d)An Art
e)a process
g) discipline

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Schools of entrepreneurial
thoughts
Kurato (2009) identifies the fowling schools :
a) Macro view
-Environmental school of thoughts
-Financial school of thoughts
-Displacement schools of thought
b) Micro View
-Entrepreneurial Trait school of thoughts (people
-Venture opportunity school of thought
-strategic schools of thought
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Theories of entrepreneurship
 Psychological theory
 Motivation Theory
 Sociological theory
 Economic theory
 The resource based theory
 Competence –Based theory
 Heterogeneous Demand theory
 Differential Advantage Theory

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Theories cont’d
 Transaction Cost Theory
 Industrial Organizational Economics Theory
 Other Social Sciences Contributions
- Anthropology
- -Economic History
- Psychology
- Sociology
- REF Source Kennedy K. Nteere (2009)
Entrepreneurial ship :A global perspective
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Roles of entrepreneurs
 Prime mover in the business enterprise
 Bears of uncertainty (risk) – regarded as the primary
function
 Idea generation and searching for business
opportunities by scanning the environment
 Evaluating business opportunities to assess their
viability
 Determination of business objectives
Product analysis and market research
 Determination of the form of ownership/organization
 Mobilizing resources needed to create and run the
business
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Differences btwn entre & small
business
 To the entrepreneurial novice, being an entrepreneur
or a small business owner is
interchangeable. However, they are not the
same. Sure, they are both self-employed, and need to
make money (regardless of how they spend it). But
there are a few differences:
 Entrepreneurs rarely want things to stay as they
are. They are looking to change things, develop
things, create more energy. Small business owners are
often happy with how things are, content to carry on
(if successful).
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 Entrepreneurs invent things, look to do things in
different ways and are often technically minded. Small
business owners are more likely to do something
others are doing, such as opening a shop.
 Entrepreneurs are often looking for the next big thing,
ready to move on once their company is good
enough. Small business owners are often more
sentimental, and see their business as part of the
community and part of the family.
 Entrepreneurs will do things more often than not
because of passion or opportunity rather than strictly
profit or a means of making a living.
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 Entrepreneurs want to change the world. Small
business owners want to make a living, and often serve
their local community first and foremost.

 Others…..

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Importance of ENT
To your country and yourself.

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Differences btwn Entre and
smallbuisness
 To the entrepreneurial novice, being an entrepreneur
or a small business owner is
interchangeable. However, they are not the
same. Sure, they are both self-employed, and need to
make money (regardless of how they spend it). But
there are a few differences:
 Entrepreneurs rarely want things to stay as they
are. They are looking to change things, develop
things, create more energy. Small business owners are
often happy with how things are, content to carry on
(if successful).
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Differences
 Entrepreneurs invent things, look to do things in
different ways and are often technically minded. Small
business owners are more likely to do something
others are doing, such as opening a shop.
 Entrepreneurs are often looking for the next big thing,
ready to move on once their company is good
enough. Small business owners are often more
sentimental, and see their business as part of the
community and part of the family.

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 Entrepreneurs will do things more often than not
because of passion or opportunity rather than strictly
profit or a means of making a living.
 Entrepreneurs want to change the world. Small
business owners want to make a living, and often serve
their local community first and foremost.

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Nature and Development of
Entrepreneurship
 Entrepreneur – An individual who takes initiative to
bundle resources in innovative ways and is willing to
bear the risk and/or uncertainty to act.
 Being an entrepreneur today:
 Involves creation process.
 Requires devotion of time and effort.
 Involves rewards of being an entrepreneur.
 Requires assumption of necessary risks.

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Nature and Development of
Entrepreneurship (cont.)
 Entrepreneurial action - Behavior in response to a
judgmental decision under uncertainty about a
possible opportunity for profit.

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Aspects of the Entrepreneurial
Process

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The Entrepreneurial Process
 Opportunity identification - The process by which an
entrepreneur comes up with the opportunity for a new
venture.
 Market size and the length of the window of
opportunity are the primary bases for determining risks
and rewards.
 Window of opportunity - The time period available for
creating the new venture.
 Business plan - The description of the future direction
of the business.

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How Entrepreneurs Think
 Entrepreneurs in particular situations may think
differently when faced with a different task or decision
environment.
 Given the nature of their decision-making environment,
entrepreneurs need to sometimes:
 Effectuate.
 Be cognitively adaptable.
 Learn from failure.

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 How Entrepreneurs Think (cont.)

 Causal process
 Starts with a desired outcome.
 Focuses on the means to generate that outcome.
 Effectuation process
 Starts with what one has (who they are, what they know,
and whom they know).
 Selects among possible outcomes.
 Entrepreneurial mind-set involves the ability to rapidly
sense, act, and mobilize, even under uncertain
conditions.

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 How Entrepreneurs Think (cont.)

 Cognitive adaptability describes the extent to which

entrepreneurs are:
 Dynamic, flexible, self-regulating and engaged in the
process of generating multiple decision frameworks
focused on sensing and processing changes in their
environments and then acting on them.
 It reflects in an entrepreneur’s metacognitive awareness.

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How Entrepreneurs Think (cont.)

 Achieving cognitive adaptability

 Comprehension questions – Aids understanding of the nature
of the environment before addressing an entrepreneurial
challenge.
 Connection tasks – Stimulates thinking about the current
situation in terms of similarities and differences with situations
previously faced and solved.
 Strategic tasks – Stimulates thoughts about which strategies are
appropriate for solving the problem (and why) or pursuing the
opportunity (and how).
 Reflection tasks – Stimulates thinking about their
understanding and feelings as they progress through the
entrepreneurial process.

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How Entrepreneurs Think (cont.)

 Entrepreneurs who are able to increase cognitive

adaptability have an improved ability to:
 Adapt to new situations.
 Be creative.
 Communicate one’s reasoning behind a particular response.

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 How Entrepreneurs Think (cont.)

 Learning from Business Failure

 Uncertainty, changing conditions, and insufficient
experience can contribute to failure among
entrepreneurial firms.
 An entrepreneur’s motivation is not simply from personal
profit but from:
 Loyalty to a product.
 Loyalty to a market and customers.
 Personal growth.
 The need to prove oneself.

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How Entrepreneurs Think (cont.)

 Loss of a business can result in a negative emotional

response from the entrepreneur.
 It can interfere with:
 Entrepreneur’s ability to learn from the failure.
 Motivation to try again.

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 How Entrepreneurs Think (cont.)

 Recovery and Learning Process

 Emotional recovery from failure happens when thoughts
about the events surrounding, and leading up to the loss
of the business, no longer generate a negative emotional
response.
 Primary descriptions of the process of recovering are:
 Loss-orientation.
 Restoration-orientation.

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How Entrepreneurs Think (cont.)

 Loss-Orientation
 Involves working through, and processing, some aspect of the
loss experience and, as a result of this process, breaking
emotional bonds to the object lost.
 This process gradually provides the loss with meaning and
eventually produces a changed viewpoint.
 Involves confrontation, which is physically and mentally
exhausting.
 Characterized by feelings of relief and pain that wax and wane
over time.

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How Entrepreneurs Think (cont.)

 Restoration-Orientation
 Based on both avoidance and a proactiveness toward secondary
sources of stress arising from a major loss.
 Involves suppression, which requires mental effort and presents
potentially adverse consequences for health.
 Provides an opportunity to address secondary causes of stress.
 May reduce emotional significance of the loss.

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 How Entrepreneurs Think (cont.)

 A Dual Process for Learning from Failure

 The dual process of oscillating between the loss-
orientation and restoration-orientation enables a person
to:
 Obtain the benefits of each.
 Minimize the costs of maintaining one for too long.
 This dual process speeds the recovery process.

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How Entrepreneurs Think (cont.)
 Practical implications of the dual process:
 Knowledge that feelings and reactions being experienced are
normal.
 Realizing that psychological and physiological outcomes
caused by the feelings of loss are “symptoms” can reduce
secondary sources of stress.
 There is a process of recovery to learn from failure, which
offers some comfort that current feelings of loss will
eventually diminish.
 Recovery and learning process can be enhanced by some
degree of oscillation.
 Recovery from loss offers an opportunity to increase one’s
knowledge of entrepreneurship.

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Ethics and Social Responsibility of
Entrepreneurs
 Entrepreneurs usually develop an internal ethical code.
 Personal value systems tend to be influenced by:
 Peer pressure.
 General social norms in the community.
 Pressures from their competitors.
 Business ethics - The study of behavior and morals in a
business situation.

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 Role of Entrepreneurship in
Economic Development
 Innovation is depicted as a key to economic
development.
 Product-evolution process - Process through which
innovation is developed and commercialized.
 Iterative synthesis - The intersection of knowledge and
social need that starts the product development process.

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Role of Entrepreneurship in
Economic Development (cont.)
 Three types of innovation:
 Ordinary - New products with little technological
change.
 Technological – New products with significant
technological advancement.
 Breakthrough – New products with some technological
change.

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Product Evolution

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