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Summary theory session 4
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Theory session 4: entrepreneurshipand food
SOURCE: KNUDSON
School of thoughts in economics:
- Schumpeter school of thought = innovation and the entrepreneur were the central figure in
economic growth and development. The market before innovation is in an equilibrium.
Innovations introduced by the entrepreneur are a source of creative disequilibrium. As other
firms adopt the innovation, less efficient firms are forced out of business until a new
equilibrium is reached. Schumpeter defined innovation as the introduction of a new good or
new quality of good, the introduction of a new method of production, the opening of a new
market, the acquisition of a new source of raw material, or by carrying out an alteration of an
existing industry structure. Innovation is not limited to new products.
- Austrian school of thought = emphasizes the entrepreneur's ability to take advantage of
imperfections in information to make innovations. The entrepreneur uses superior in
formation to introduce an innovation and earn profits. Unlike Schumpeter, the Austrians see
a market before innovation as being in disequilibrium. The introduction of the innovation
increases the amount of knowledge in the market moving it toward a new equilibrium.
Entrepreneurial characteristics
- Risk takers: individuals who seek to push the boundaries of conventional practices and
wisdom. Entrepreneurs enjoy the challenge of venturing into unknown territories and
practices.
- Having vision: entrepreneurs' have an abstract image of the kind of business they intend to
create, one that guides their own intentions. As organizations grow beyond the scope of one
person, entrepreneurs must possess the ability to communicate their vision to others.
- Exhibit intentionally: is a state of mind directing a person's attention, and therefore
experience and action toward a specific goal or path in order to achieve an end.
- Highly motivated
- Intense desire to build something of one’s own
- Having the ability to maintain high energy levels for extended periods of time
- Perceptive and goal oriented: the ability to spot business ideas, to launch new products, or
open new markets is triggered by the accumulation of confirming or disconfirming evidence
as perceived by the entrepreneur
- Have a need for achievement, or a strong ego-drive: entrepreneurs strive to make a
difference in their own lives or the lives of others. They are determined, persistent, and
committed to a job until it is finished.
- Dominant: possess the need to influence others to do what they want done and to direct the
activities of subordinates
You can be an entrepreneur by starting your own venture, working for other businesses run
by other entrepreneurs, being entrepreneurial in larger organisations (intrapreneurship).
Entrepreneurship = can be defined as the personalized drive and capability to commercialize (bring
to market realization) a product, service, process, or business idea. Entrepreneurship can exist in
degrees based on how strong the drive is in motivating the personal behaviour of the entrepreneur
and ex tent of the entrepreneur's capabilities.
, Innovation = can be defined as the process of creating a new product, service, market, process, or
organization. Innovation can exist in degrees running from "new to the world" (most innovative) to
"new only to the individual" (least innovative).
An innovator is not necessary an entrepreneur and an entrepreneur is not necessarily an
innovator.
Connection between entrepreneurship and innovation
Two drives propel the behaviour of economic actors (individuals or firms) in this realm:
- (a) the drive to commercialize an idea, that is, bring it to market realization; and
- (b) the drive to innovate, that is, create the idea in the first place.
These two drives interact to form four possible entrepreneurial/innovation types:
- (a) master entrepreneurs that are skilled managers, and risk bearers, but not innovators
Have an entrepreneurial approach (risk taking, high-energy etc.) but not driven to innovate
new things. Master entrepreneurs see market gaps and fill them with existing business
models, products and services. Examples are food manufacturers or local grocery store
managers as they need to be entrepreneurial in their approach to developing local business,
but are not innovating as they follow corporate guidelines and make the most out of given
resources.
- (b) innovative entrepreneurs, skilled entrepreneurs that are also innovators
Exhibit primary entrepreneur traits and secondary innovator traits. Innovative entrepreneurs
are constantly seek out new challenges, enjoy taking calculated risks, and are driven by a
vision of what the future could be. Unlike master entrepreneurs, they also look for new ways
of doing things. Innovative entrepreneurs often "cut their teeth" working for others and then
grow restless with the pace of change and lack of control over their future. Eventually,
innovative entrepreneurs start their own ventures in which they improve product and
processes in effort to create a place for them in the marketplace. So, they rely on a mix of
tried and true and new business models, products, and processes but they improve them.
Ben and Jerry's Ice Cream and Newman's Own are good examples of innovative
entrepreneurs.
- (c) entrepreneurial innovators, skilled innovators that are also entrepreneurs
Exhibit primary innovator and secondary entrepreneur traits. Entrepreneurial innovators are
never satisfied, they are constantly developing improvements to processes. Unlike master
innovators who are content with innovation in and of itself, entrepreneurial innovators seek
out change, grow tired of bureaucracy, and are driven to take risks to see that their
innovations reach the marketplace. Entrepreneurial innovators see market gaps and fill them
with new business models, products, and processes that they are willing to personally take to
the marketplace. First-mover firms in the organic food industry started with a conviction
about what product to produce. This conviction motivated production innovation that, in
turn, triggered the need to market the products so created.
- (d) master innovators that are skilled innovators, but not entrepreneurs
Express dominant innovator traits (always looking for new ways to do things etc.) with little
or no interest in introducing the innovation to the market. They are content to innovate in a
given area, usually one they have trained for and know well. Master innovators see market
gaps, yet merely (louter) develop the new business models, products, and processes that fill
them. Bench engineers and bench scientists spend entire careers improving formulas and
processes, with little desire to take their innovations to market themselves.
One should not assume that a particular combination of entrepreneurial and innovation traits
fits all situation. Bijvoorbeeld als een agrarisch bedrijf zich graag wilt uitbreiden dan zijn
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