Summary of all the articles for Entrepreneurship(EBB106A05), University of Groningen. The summary contains the following articles:
1) Davidsson, P. (2005). Researching Entrepreneurship.
2) Van Praag, C.M. (1999). Some classic views on entrepreneurship.
3) Bruyat, C. & Julien, P. (2000). Defining th...
1) Davidsson, P. (2005). Researching Entrepreneurship.
Chapter 1 What is entrepreneurship?
1.1 On the variety of definitions and views of entrepreneurship
There is lack of common understanding of what entrepreneurship precisely is. In conclusion, the
different entrepreneurship definitions actually address two relatively distinct social realities.
The first of those is the phenomenon that some people, rather than working for somebody else under an
employment contract, strike out on their own and become self-employed, or team owner-mangers of an
independent business. In short, entrepreneurship is anything that concerns independently owned(often
small) firms and their owner-mangers.
The second social reality that emerges is that the development and renewal of any society, economy or
organization requires micro-level actors who have initiative and persistence to make change happen. In
the end, it is the unique knowledge, perceptions and goals of individuals equipped with the drive to take
action accordingly that initiate novelty. A problem with a lot of definitions is that they cover an amalgam
of the two realties described above.
1.2 My proposed view of the entrepreneurship phenomenon
The Austrian economics note that entrepreneurship consist of the competitive behaviors that drive the
market process. Firstly, it is based jointly on behavior and outcomes. The behavior part is necessary for
not losing track of the fact that micro-level decisions and actions are needed for any change to be
introduced. When we think of entrepreneurship as a societal phenomenon, it is a distinctive advantage
to include an outcome criterion. Secondly, it puts entrepreneurship squarely in a market context and
makes clear that it is the suppliers who exercise entrepreneurship. When suppliers engage in
entrepreneurship, they introduce new, improved or competing offerings in an emerging or already
existing market. They thereby drive the market process in one or more of the following ways:
-They provide customers with new choice alternatives, potentially giving some of those customers more
value for their money.
-They stimulate incumbent actors to improve their market offerings in their turn, which increases
efficiency and/or effectiveness of those actors.
-If successful, they attract other new entrants to the market, thus further increasing competitive
pressures towards improved efficiency and effectiveness.
Driving the market does not require that the first mover makes a profit. If subsequently someone else
gets it right, it leads to a lasting change in the market.
See figure 1,2 on page 8(5). New along the market axis means either than an entirely new market
emerges, or that an activity is new to an existing market. In the latter, new could mean the launch of an
innovation, but merely entering as a new competitor could also qualify. Along the firm axis, new means
that either the new activity is an independent start-up, implying that a new firm emerges, or it is an
internal new venture, which means that the firm has previously not been making this particular market
offering. When you take the definition “the introduction of new economic activity”, quadrants I and IV
qualify for entrepreneurship, II and III do not.
1.3 New offer as entrepreneurship
The first main entry in quadrant I is new offer, that is when something so new is introduced that a new
market is created or at least no supplier has previously made the same offer in the same market.
,It consists of three categories:
-New product or service.
-New bundle refers to any combination of product and service components that as a package is unique
relative to what has previously been offered on the market.
-Price/value relation doesn’t create a new market but drives the market process because it changes
consumer choices and gives other competitors reason to change their offerings. It may represent a
strategic change that relies on expected economies of scale or experience, or a switch from low
volume/high margin to high volume/low margin strategy.
1.4 New competitor as entrepreneurship
The second main entry in quadrant I is new competitor, that is not only innovative but also imitative
entry be included. This is when a new start-up firm enters the market, or an existing firm launches a new
product line in a situation where other firms already supply the market with essentially the same
product. The reason for including imitative entry is that such entry drives the market process in the sense
that consumers get additional choices and incumbent firms get reason to change their behavior to meet
this new competition. Another point for this argument is that studies have found that entry with
complete lack of novelty tends not to appear empirically. No entrant is a perfect clone of an existing
actor.
1.5 Geographical market expansion as entrepreneurship(quadrant IV)
Although the activities are no longer new from the firm’s perspective, their introduction in new markets,
if not totally unsuccessful, drives the market process in these new places.
1.6 Organizational and ownership changes are not entrepreneurship(quadrant II)
It is certainly conceivable that reorganization facilitates the creation of new economic activity by the
organization. However, it is not necessarily the case. It is also conceivable that organizational units that
are transferred to new ownership and/or undergo internal reorganization experience changes in job
satisfaction and/or financial performance without at all changing the consumers’ choice options or
influencing the behavior of competitors.
1.7 Business as usual and non-entrepreneurial growth(quadrant III)
It seems easy to exclude quadrant III from entrepreneurship. However, you can find an element of
competitive behaviors that drive the market process in routine actions. Non-entrepreneurial growth
means passively or re-actively letting existing activities grow with the market. This would not provide
much cause for alarm among competitors nor give customers new choices.
1.8 Entrepreneurship as micro-level behavior with macro-level implications
It is possible, for example, that a new venture that fails miserably has important positive effects on the
economy-at-large, because both those involved and other learn for the future and can come up with
smarter solutions that would not have been within reach without the initial “failure”. See figure 1.3 at
page 7(13). Venture here means the sole activity of a new firm or a new, additional activity by an
established firm. Thus venture should be interpreted as a new-to-the-market activity. Quadrant I are
ventures that are successful themselves and which produce net utility to the society. The failed ventures
in quadrant III represent launching efforts that do not take off financially, and neither do they inspire
,followers or incumbent firms so that they eventual net effect becomes positive on the societal level. The
catalyst ventures in quadrant IV are not successful on the micro level, but they do drive the market
process because they bring forth such behavior on the part of other actors.
The ventures in quadrants I and IV represent entrepreneurship, whereas the failed ventures in quadrant
III do not. Re-distributive ventures in quadrant II are ventures that yield a surplus on the micro-level
while at the same time the societal level is negative. You can doubt about if it’s entrepreneurship.
1.9 Degrees of entrepreneurship
What should be the criterion by which we judge the degree of entrepreneurship? There are at least
three possibilities:
-The degree of(direct + indirect) impact on the economic system. A variation on this is the “amount of
wealth created”. Both variations suffer assessment problems.
-The degree of novelty to the market. More creative = more entrepreneurship. It has the advantage that
it is not totally impossible to assess in real time. However, a high degree of novelty doesn’t guarantee
great success.
-The degree of novelty to the actor. It assesses how different the action was from what the actor has
done before. A conservative actor who does something new for him could make him highly
entrepreneurial, but in fact it could not be so new.
1.10 Summary
Read on page 9(16).
Chapter 2 Entrepreneurship as research domain
2.1 Why distinguish between the phenomenon and the research domain?
Entrepreneurship as a research domain aims at better understanding of the phenomenon
entrepreneurship. The research domain can’t be equated to the study of empirical cases known to
qualify under the definition of entrepreneurship that we discussed. How can that be? Although including
an outcome criterion is desirable when we discuss entrepreneurship as a societal phenomenon, it
becomes a burden when we think of entrepreneurship as a research domain. This is because we have to
be able to study entrepreneurship as it happens, before the outcome is known. Researchers must be
allowed to go deeply into aspects of the process without following up on the outcomes, and still be
acknowledged for doing entrepreneurship research. That is attempts to offer buyers new choices should
suffice. A second important reason for making a distinction between the phenomenon and the research
domain is that previous and current entrepreneurship practice does not necessarily have all the answers
needed to develop normative theory about entrepreneurship. That is, there may be better ways to learn
meaningful things about entrepreneurship than finding real cases of “best practice”. To study what have
successful entrepreneurs been doing is important, but also what could be done.
Another reason for the distinction is that the behavior plus outcome definition lures one into a
retrospective view that compresses time and de-emphasizes the process aspects. To study the processes
as they happen is important in order to avoid selection and hindsight biases. Furthermore, although the
inclusion of a socially beneficial outcome clarifies the role of entrepreneurship in the economy, it may
have detrimental effects on the long term credibility of entrepreneurship research in political and fellow
academic circles if we portrayed the micro-processes that we study as always good.
,2.2 Previous attempts at a domain delineation
Maybe the kind of all-inclusive delineation gives the entrepreneurship domain a “hodgepodge” or
“potpourri” appearance, which hinders theory development and academic legitimacy. Shane &
Venkataraman used the scholarly domain, which is an examination of how, by whom, and with what
effects opportunities to create future goods and services are discovered, evaluated, and exploited. The
field involves the study of sources of opportunities; the processes of discovery, evaluation, and
exploitation of opportunities; and the set of individuals who discover, evaluate, and exploit them. They
further point out the following three sets of research questions as central:
-Why, when and how opportunities for the creation of goods and services come into existence?
-Why, when and how some people and not others discover and exploit these opportunities?
-Why, when and how different modes of action are used to exploit entrepreneurial opportunities?
Later, they agreed that outcomes on the level of industry and society should be considered as well. As
regards antecedents of the process and its outcomes they emphasize the characteristics of individuals
and opportunities as the first-order forces explaining entrepreneurship and hold that environmental
forces are second order. They depict the economy as fundamentally characterized by heterogeneity.
Entrepreneurship can, but not always, include the creation of new organizations.
One of the few debatable points is the general primacy given to the individual and the opportunity. This
does not seem to give much room for entrepreneurship research on more aggregate levels of analysis. A
more important question mark is their definition of opportunity as “those situations in which goods,
services, raw materials and organizing methods can be introduced and sold at greater than their cost of
production”. Shane & Venkataraman point out that we should study with what effects opportunities are
exploited. But with that definition, entrepreneurship becomes characterized by certainty rather than
uncertainty regarding one important aspect of the effects of the pursuit of opportunity; it is profitable.
The opportunity definition is compatible with the entrepreneurship phenomenon but largely unhelpful
for entrepreneurship as a research domain. This is because defining opportunity in this way is
inconsistent with having the outcomes of entrepreneurship as an open research question. However,
opportunity is often defined or conceptualized in an inconsistent manner.
Gartner’s view is that entrepreneurship if the creation of new organizations. This focus is because of two
reasons: (1)a lack of treatment of organizational emergence in organizational theory, (2)a frustration
with the pre-occupation that early entrepreneurship research had with personal characteristics of
entrepreneurs. Gartner suggested that research should focus on the behaviors in the process of
organizational emergence. Gartner’s view has a defined focus and a strong process orientation, but he
does not emphasize the discovery process and directs no or only cursory attention to the possibility of
alternative modes of exploitation for given opportunities.
2.3 My suggested domain delineation
First, entrepreneurship research should study behavior in the process of emergence. That’s three very
important components right there: behavior, process and emergence. Also, we should distinguish
between two sub-processes: discovery and exploitation. Further, entrepreneurship should not study only
or primarily the emergence of new organization, but the emergence of new market offerings through
different modes of exploitation. Research should also study a variety of outcomes on different levels. It
should also be clear that the economy is characterized by heterogeneity. The economy is also
characterized by uncertainty. Empirical entrepreneurship research need not and should not be restricted
to the study of empirical cases known to qualify as “entrepreneurship”.
, 2.4 Uncertainty and heterogeneity
Two important aspects of organizational heterogeneity are governance structure and resources. The
environment will also be heterogeneous, and this will have a profound effect on what venture ideas are
attractive and likely to succeed. Heterogeneity also occurs over time. People learn and change. The
universe of perceptible and profitable opportunity is not the same for all individuals or organizations.
Information collection and processing, careful planning and calculation can’t give a conclusive and
reliable answer as to whether something will be successful or not, only (trial) implementation will tell.
Knightian uncertainty means the future is not only unknown, but also unknowable.
2.5 Processes of emergence: behaviors in the interrelated processes of discovery and exploitation
Shane & Venkataraman state as their point of departure that “for a field of social science to have
usefulness it must have a conceptual framework that explains and predicts a set of empirical phenomena
not explained or predicted by conceptual frameworks already in existence in other fields”. Both
discovery and exploitation are required for entrepreneurship to happen, and both should be studied in
research according to them. Kirzner holds that entrepreneurship consists solely of discovery, exploitation
is something else.
The emphasis on the interrelated processes of discovery and exploitation as new economic activities
emerge implies that a very central set of research questions for entrepreneurships research concerns
what individuals and other economic entities actually do when they initiate, refine, and realize ideas for
new business ventures. Discovery is used to maintain consistency with prior literature. It refers to the
conceptual side of venture development, from an initial idea to a fully developed business concept
where many specific aspects of the operation are worked out in great detail, especially as regards how
value is created for the customer and how the business will appropriate some of the value. Discovery is a
process. Exploitation refers to the decision to act upon a perceived opportunity, and the behaviors that
are undertaken to achieve its realization. It deals primarily with resource acquisition and co-ordination,
as well as market making. Discovery and exploitation are best conceived of as overlapping processes.
2.6 Real or induced, and completed as well as terminated
Practicing entrepreneurs do not necessarily have all the answers. Pure theory development and
laboratory research methods may sometimes prove better avenues to arrive at normatively valid results
and theories. If we study successfully completed cases only, there is no telling whether terminated cases
shared the same characteristics.
2.7 Across organizational contexts
It has additional meaning beyond opening up for the study of discovery and exploitation both in
emerging and existing firms, small and large, owner-managed or else. Change in the organizational
context as explicitly related to the creation of new, market-rated activity is clearly within the
entrepreneurship research domain.
2.8 New business ventures: Venture ideas and their contextual fit
Business ventures includes independent start-ups as well as new internal ventures, and also new market
offers that are so limited that the actors involved do not necessarily conceive of them as entire ventures.
The term opportunity refers to something not yet realized. It signals the sound development that the
field is really turning towards a focus on emergence, rather than starting from existing firms and
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