Entrepreneurship: The outcome is the creation of sustainable economies of experience.
These
An Overview
economies of experience are crucial to entrepreneurs, particularly when they
launch firms.
Theory of Effectuation by Sarasvathy
The notion of effectuation was developed by Sarasvathy (2001) to explain the
inherent characteristics and nature of the entrepreneurial process. Sarasvathy
argues that the process of entrepreneurship is primarily “effectuation”
rather than “causation”. While effectuation processes take a set of methods as
given and concentrate on choosing amongst different effects using those
means, causation processes take a specific effect as given and focus on
choosing the ways to achieve that effect using means available (Sarasvathy,
2001). In a causation process, an individual might create a menu for a
particular meal by gathering the ingredients, and subsequently prepare the
intended meal. However, while using an effectuation process in preparing a
meal, the maker first checks to determine what ingredients are on hand before
combining these resources to create a palatable meal. According to
Sarasvathy, the entrepreneurial effectuation process starts with a set of
restricted resources, and the entrepreneur then chooses between the possible
outcomes in accordance with a preset degree of manageable loss. The
entrepreneur's function is crucial to the effectuation process. The
entrepreneur weighs the implications and then uses the existing means to
exploit the contingencies appropriately. The four guiding principles of
Sarasvathy's theory of effectuation are: entrepreneurial decisions based on
affordable losses rather than expected returns, the use of strategic
partnerships instead of competitive analyses, the utilisation of contingencies
instead of the use of pre-existing knowledge, and the control of an
unpredictable future rather than the prediction of an uncertain one. The
effectuation hypothesis states that an entrepreneurial firm makes decisions
differently than an established firm.
Theory of Entrepreneurial Bricolage
The behavioural theory of entrepreneurial bricolage, first put forth by the
French anthropologist Lévi-Strauss in 1962, seeks to comprehend how
entrepreneurs respond and act when confronted with resource limitations in
order to "manage market uncertainties, survive, and perhaps even flourish
despite resource constraints". Bricolage actually deals with making things
and carrying out plans with whatever is available. Bricolage is more
prevalent in microbusinesses and SMEs because resource constraints are
typically more severe in these sectors . Entrepreneurs' creativity encourages
bricolage by developing organisational resilience, improvisation, and making
use of technical systems and artefacts. Businesses that use entrepreneurial
bricolage refuse to implement the restrictions imposed by the shortage of
resources. Instead, these companies gather both material and immaterial
resources and build creative business strategies, tactical processes, and
policies to achieve the desired output through learning, experimentation, or
even serendipity. Entrepreneurial Bricolage fosters catalytic innovations and
scale/growth changes.
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Activity 3 Introduction to
Entrepreneurship
Evaluate the contribution of Joseph Schumpeter and David McClelland with
regard to entrepreneurship.
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1.6 TYPES OF ENTREPRENEURSHIP
Different individuals have different aims, goals, dreams, and visions for the
type of business they wish to start. This decision depends primarily on their
skill level, prior knowledge, experience, entrepreneurial ecosystem of the
country or region, preference etc. In general, following types of
entrepreneurship are observed:
Small Business Entrepreneurship
Small businesses make up the vast majority of entrepreneurial activities in
India. Small business operators make money to sustain their families and
maintain a basic quality of life. Because they are small, mostly informal and
lack the substantial innovative capability, small businesses find it difficult to
obtain venture investment for efficient operation. These entrepreneurs
generally borrow money from friends and family or utilise their own savings
and resources to fund their business activities. Frequently, the workers in
their enterprise are neighbours or relatives. Vast majority of these businesses
are family managed and are inherited from parents. Local milk kiosks,
grocery stores, hair salons, boutiques etc. are examples of small business
owners.
Large Company entrepreneurship
These are the big business houses that continue to provide cutting-edge
products and services to earn a profit. Over time, they have grown into big
organisations and have developed their sustainable competitive advantage
over their competitors. To suit the ever-changing needs of their clients, they
are always developing their technology through research and development.
Apple or Samsung are two well-known examples of large-scale corporate
entrepreneurship. These organizations are managed by skilled and creative
professionals who understand how to sustain innovation to maintain
competitive advantage of the businesses. These businesses offer a variety of
items based on their core product or services. When a small business
experiences rapid growth, it can quickly scale up to become a major
corporation. This is also feasible if a major corporation buys them. Large-
company entrepreneurship exhibits specific lifecycle.
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Entrepreneurship: Scalable Start-up Entrepreneurship
An Overview
Scalable start-up entrepreneurship starts with an innovative idea that has the
potential to bring about significant changes. Before starting a profitable
business, these entrepreneurs identify a market need and provide a solution
for that. Venture capitalists typically grant investment for such businesses on
the basis of the originality and scalability of the business idea. They hire
specialized workers in order to achieve their goals of quick growth and large
profits.
International Entrepreneurship
In international entrepreneurship, entrepreneurs carry out business operations
outside the borders of India. This involves setting up a sales unit overseas or
exporting goods from one host country to another. International
entrepreneurship is profitable when local demand for goods and services is
declining and demand in world market is rising. Before they are mature
enough to explore other overseas markets, international business
entrepreneurs initially offer their products just in their home territory.
Social Entrepreneurship
Social entrepreneurs recognize a social problem and plan their
entrepreneurial initiatives to benefit the society. These entrepreneurs develop
innovative goods, services or remedies to tackle urgent societal challenges.
Efforts to protect the environment, animal welfare, care for underserved
populations through humanitarian endeavours, encouraging community
health and education etc. are some of the areas where social enterprises work.
The non profit enterprises are motivated by the realisation of societal benefits
rather than absolute orientation towards profit. The goal of the majority of
social enterprises is to prioritise financially sustainable social change. These
organisations use moral strategies to encourage success, such as mindful
consumption and corporate social responsibility. Instead of focusing on
making money and expanding the owners' wealth, social entrepreneurship
seeks to better the world. The non-profit organisations committed to
resolving various social issues are the best examples of social enterprises.
Environmental Entrepreneurship
This form of entrepreneurship is also known as ecopreneurship and green
entrepreneurship. These businesses undertake environmentally conscious
endeavours or practices while making profit from their business activities. An
ecopreneur employs practises and business philosophies that are
environmentally conscious. Furthermore, they work to supplant the existing
products or services with environment friendly alternatives. So, as opposed to
prioritizing monetary gain, environmental entrepreneurship promotes social
and environmental value. The creation of audiobooks, impact blogs, and SaaS
software are a few examples of environment friendly enterprises that don't
hurt plants.
Technopreneurship or Technological Entrepreneurship
A technopreneur builds a company that heavily depends on innovative use of
22 technology, and this involves efficient use of his technical expertise
and entrepreneurial acumen. These businessmen have the ability to change Introduction to
Entrepreneurship
the market and offer their clients cutting-edge solutions. Technopreneurs
undertake measured risks that could be financially rewarding. The backbone
of the products and services provided by such a corporation is technology.
Technology companies prefer to employ innovative and tech-savvy
employees who are eager to explore technological advancements to offer
unique solutions to the consumers.
Imitative Entrepreneurship
This type of entrepreneurship strives by mimicking or imitating any pre-
existing business concepts and copy the currently available goods and
services. These companies frequently operate on a franchise contract. These
business owners are willing to make changes to the current goods or services
and improve them, but they are not very interested in bringing in new
innovations. Imitative businesses frequently make an effort to modify current
products, services, or technologies to suit local requirements. The best
examples of imitative entrepreneurship are fast food restaurants.
Researcher Entrepreneurship
Researcher Entrepreneurs thoroughly investigate the market and available
opportunities before launching the business. These entrepreneurs believe that
if they are well-informed, organized, and prepared, they would have a
higher chance of being successful in their business. They depend less on
intuition and gut feelings and more on knowledge, data, and logic. Before
establishing their company, they follow a detailed plan and conduct a
thorough study of the research findings to lower the probability of failure.
Innovation Entrepreneurship
Innovation Entrepreneurship involves the identification of market gaps and
leveraging cutting-edge technology and innovative thinking to create goods
and services that can improve people's lives. Such business ideas are novel
and unique that nobody else has thought of yet. People who routinely think
outside the box and come up with creative and imaginative solutions are
suitable for innovation entrepreneurship. Products like Tesla and iPhones are
examples of innovation entrepreneurship.
Cyber Entrepreneurship
Cyber entrepreneurs are those who exploit the advantages of information
technology to run a business. They create original concepts for supplying
goods and services to consumers via internet-based applications. These
individuals are well-informed about the digital or virtual environment and
provide their goods or services via online portals to avoid the inconvenience
of going to a physical store. Since these businesses operate online, they are
known as virtual businesses. Cyberpreneurship includes online retail and
over-the-top (OTT) entertainment services.
1.7 SUMMARY
Entrepreneurship is the act of creating a business while bearing all the risks
with the hope of making a profit. But as a basic definition, that one is a bit
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Entrepreneurship: limiting. The more modern entrepreneurship definition is also about
An Overview
transforming the world by solving big problems like bringing about social
change or creating an innovative product that challenges the status quo of
how we live our lives on a daily basis. The present academic discipline of
entrepreneurship has evolved from various schools of thought.
Several theories have been propounded in order to describe the idea of
entrepreneurship. The majority of these theories have their origin in five
academic disciplines namely, economics, psychology, anthropology,
management and sociology. Different individuals have different aims, goals,
dreams, and visions for the type of business they wish to start. This decision
depends primarily on their skill level, prior knowledge, experience,
entrepreneurial ecosystem of the country or region, preference etc.
1.8 KEYWORDS
Entrepreneurship: It is the capacity of a person to assume risk,
accountability, and challenges with a view to explore opportunities, disrupt
market norms, and create values.
Manager: A Manager is primarily responsible for overseeing and guiding the
ongoing operations of an existing firm with the objective to produce and
supply goods and services in an efficient and timely manner.
Intrapreneurs: They are employees of an organization who innovate for the
business and take the risks for their employer (i.e., an intrapreneur is an intra-
company entrepreneur).
Innovation Entrepreneurship: It involves the identification of market gaps
and leveraging cutting-edge technology and innovative thinking to create
goods and services that can improve people's lives.
Researcher Entrepreneurship: Researcher Entrepreneurs thoroughly
investigate the market and available opportunities before launching the
business.
1.9 SELF-ASSESSMENT QUESTIONS
1. Mention the basic theories of entrepreneurship. Discuss any 2 theories
with relevant examples.
2. Explain the factors which motivate people to become entrepreneurs.
3. Give an account of the emergence of the entrepreneurial class and
elaborate on the various types of entrepreneurs.
4. What is the importance of entrepreneurship in a developing country like
India?
5. What is entrepreneurship? Discuss the various types of entrepreneurs.
1.10 REFERENCES/FURTHER READINGS
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Policy for Growth and Expansion. New York: McGraw-Hill.
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Ardichvili, A., Cardozo, R., & Ray, S. (2003). A theory of entrepreneurial Introduction to
Entrepreneurship
opportunity identification and development. Journal of Business Venturing,
18(1), 105-123.
Alvarez, C., Urbano, D., Coduras, A. and Ruiz‐Navarro, J. (2011),
Environmental conditions and entrepreneurial activity: a regional comparison
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140.
Busenitz, L. W., West III, G. P., Shepherd, D., Nelson, T., Chandler, G. N.,
& Zacharakis, A. (2003). Entrepreneurship research in emergence: Past
trends and future directions. Journal of Management, 29(3), 285–308.
Cimadevilla, B.J. and Sánchez, E.F. 2001. Factores determinantes en la
creación de pequeñas empresas: una revisión de la literatura. Papeles de
Economía Española, (89), 322- 342.
Chandler, A.D. (1962) Strategy and Structure: Chapters in the History of
American Enterprise. MIT Press, Boston.
Cole, A.H. (1942) Entrepreneurship as an Area of Research. Journal of
Economic History Supplement, 2, 118-126.
Cunningham, J.B. and Lischeron, J. (1991) Defining Entrepreneurship.
Journal of Small Business Management, 29, 45-61.
Davidsson, P., Delmar, F. & Wiklund, J. (2006), Entrepreneurship and the
Growth of Firms, Edward Elgar Publishing.
Drucker, Peter F., & Peter Ferdinand Drucker. (1994). Innovation and
entrepreneurship: Practice and principles. Oxford, UK: Routledge.
Gartner, W.B. (1985). A conceptual framework for describing the
phenomenon of new venture creation. Academy of Management Review, 10,
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Gartner, W.B. (1988). Who is an entrepreneur? Is the wrong question.
American Journal of Small Business, 12(4), 11–32.
Gartner, W.B. (1990). What are we talking about when we talk about
entrepreneurship? Journal of Business Venturing, 5, 15–28.
Gartner, W.B. (1993). Organizing the voluntary association.
Entrepreneurship: T heory and Practice, 17(2), 103–106.
Gartner, W.B. (2001). Is there an elephant in entrepreneurship?
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Gnyawali, D.R. and Fogel, D.S. (1994) Environments for Entrepreneurship
Development: Key Dimensions and Research Implications. Entrepreneurship
Theory and Practice, 18, 43-62.
Hagen, Everett E. (1962) On the Theory of Social Change: How Economic
Growth Begins. Homewood, IL: The Dorsey Press, Inc.
Katz, J., & Gartner, W. B. (1988). Properties of emerging organizations. The
Academy of Management Review, 13(3), 429–441.
Kirzner, I. (1973). Competition and Entrepreneurship. Chicago, IL, US:
University of Chicago Press.
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