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Entrepeneurship B&M/TM, Summary
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Entrepreneurship notes – summary of the articles and lectures28-10-2020
Lecture 1 Article 1: The rise of the entrepreneurial economy and the future or dynamic
capitalism, Thurik, R., Stam, E., & Audretsch, D.B. (2013).
A shift in the organization of developed economies had been taking place: away from what has been
characterized as the managed economy toward the entrepreneurial economy or so called dynamic
capitalism. Overall the technological change is fundamental for the shift, but it is not the only factor
that affect the change.
There is a growing interest in dynamic modelling of capitalism instead of the innovation in shaping
structure. For a long time developed economies could be characterized as a managed economy.
Several revolutions led to the rise of multinationals. This enterprise was dominant until the 1980s and
was characterized as the era of mass production. Stability, continuity and homogeneity were the
cornerstones of the managed economy. It was predicted the upcoming technological changes would
blow of small scale operations. And in a lot of activities, small scaled companies did perform worse
than the multinationals.
The managed economy has been replaced by the entrepreneurial economy. The managed economy is
defined as an economy where economic performance is positively related to firm size, scale
economies and routinized production and innovation. The entrepreneurial economy is defined as an
economy where economic performance is related to distributed innovation and the emergence and
growth of innovative ventures.
The recognition of the emergence of the entrepreneurial economy helped to trigger policy debates to
promote entrepreneurship through entrepreneurship policy.
The start of the shift was the shock of the ICT revolution emerging in the 1970s, which not only
triggered numerous intermediate changes but also ultimately led to the entrepreneurial economy. The
final role of entrepreneurship results from the massive spurt in economic growth resulting from the
introduction of ICT, the expansion of participation in the global economy.
The public policy must also be changed in this time. The traditional approach to entrepreneurship
policy has focused on new firms and small firms. However, the new entrepreneurial economy suggest
a broader approach, promoting entrepreneurial behaviour.
Kirchhoff discriminates three dimensions to foster dynamic capitalism:
- Removing barriers to entry;
- Facilitating resource mobility;
- Stimulating international competition.
The factors for the shift are:
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,1. Information and communication technology
Karl Marx made the link between technology and institutions, broadly considered. The most
prolific technological change over the last decades involves the rise of ICT. The impact of
technological change as characterized by the advent of ICT on organizational structure has
shifted the competitive advantage away from larger scale organizations to smaller scale
organizations. ICT has made entrepreneurship more competitive. Any change in economic
regime based on new technology is accompanied by the arrival of numerous small firms. New
technology creates new market. However, ICT has reduced the competitive advantage of larger
firms. ICT tools and open access to the internet created a worldwide platform and that made it
easier for small firms to do business. The second reason concerns scale effects in transaction
costs. The costs, which were higher for small businesses, are almost eliminated because of the
new technology and the internet.
2. Demise communist system
This factor comes from the demise of the Soviet communism. The Soviet system could not
compete with the upcoming ICT technologies in the Western world. They were lagging behind
very fast. A new leader, Mikhail Gorbachev tried to take advantage of the tools of a market
economy without destroying socialism by capitalizing the ICT while maintaining control over
information. However, this strategy was unworkable, as participation in the ICT revolution
inevitably increases information flows outside of state control, leading to the ‘Dictator's
dilemma’. According to which authoritarian regimes have to choose between ensuring economic
growth and maintaining social control. Because ICT allows people not only to be well informed
but also to discover business opportunities, its use became increasingly relevant in the West, while
it began to produce frustration under the Soviet system from the mid-1980s onwards. ICT was
only accessible to members of the party-state elite. Believing that communism and democracy
could be made complementary, Mikhail Gorbachev set in motion structural reform policies. These
perestroika policies had three main dimensions: glasnost or openness (less censorship and
greater freedom of information and thought); radical economic reform; and the democratization
of political institutions.
3. Globalization
A second factor for the shift from managed to the entrepreneurial economy involves the process of
globalization. This term is generally connected to the free movement of goods, capital, people
and ideas around the globe. ICT itself facilitated the emergence of contemporary globalization.
The microprocessor revolution has made it feasible for nearly everyone to participate in global
communications, via e.g. email. Capitalism could not go completely global because much of the
globe was beyond its reach. Forty percent of humanity lived under communism.’
Off-shoring, i.e., outsourcing across international borders, accounts for a large share of the
increase in global FDI. Both captive offshoring (moving activities abroad but keeping them
inside the company) and outsource offshoring (moving activities abroad to firm outside the
company) contribute to this increase.
4. Corporate reorganization
The pressure of globalization and the ICT revolution led to waves of reorganizations and
organizations changing internal and external organisation of corporations. This has led to new
business models of large corporation and increases the number of new firms. Opportunities
provided by displaced workers (Thuriket al., 2008). Thus, as globalization spreads, employment
tends to stop increasing and even decreases in large, incumbent firms, generating entrepreneurial
opportunities for new firms and small firms. Because of the globalization there was a trend of
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, downsizing companies. Not only because the ICT revolution, but also because of the
opportunities to produce for lower costs in foreign countries.
5. Knowledge production
The knowledge spill over theory of entrepreneurship states that entrepreneurial activity is greater
in the presence of higher investments in knowledge among others, who show that regions with
greater investments in new knowledge also have higher start-up rates.
6. Prosperity and entrepreneurship
Investments in ICT and globalization are found to be drivers of economic growth, also as:
o The increase in the service orientation of developed economies is due to relatively high
income elasticities of personal and social services combined with their relatively low labor
productivity.
o The increase in individual wealth has led to a growing differentiation of consumer
preferences, and hence, business opportunities.
o The supply side of entrepreneurship is influenced by drivers of occupational choice.
7. Implications for public policy
The shift from managed to the entrepreneurial economy leads us to rethink the appropriate policy
response, the so called “entrepreneurship policy”. Rather than a narrow focus on promoting new
firms and small firms, the appropriate response of public policy should be to rethink the policy
approach in a broad and pervasive sense so that the focus is not on developing entrepreneurship
policy but rather on policy enabling dynamic capitalism, in which entrepreneurship plays a key
role.
Lecture 1 Article 2: The promise of entrepreneurship as a field of research, Academy of
Management Review, Shane, S., & Venkataraman, S. (2000)
Entrepreneurship has become a broad label under which a hodgepodge of research is housed. The
lack of a conceptual framework has precluded the development of an understanding of many
important phenomena not adequately explained by other fields. Entrepreneurship is concerned with the
discovery and exploitation of profitable opportunities. A framework to explain and predict relative
performance between firms is useful to strategic management, but it is not sufficient for
entrepreneurship.
By providing a framework that both sheds light on unexplained phenomena and enhances the field’s
legitimacy and prevent its marginalization as only ‘’a research setting or ‘’teaching application’’.
Entrepreneurship involves the nexus of two phenomena: the presence of lucrative opportunities and
the presence of enterprising individuals.
Organization scholars are fundamentally concerned with three sets of research questions about
entrepreneurship:
1. Why, when, and how opportunities for the creation of goods and services come into existence
2. Why, when, and how some people and not others discover and exploit these opportunities
3. Why, when and how different modes of action are used to exploit entrepreneurial opportunities.
- Entrepreneurial opportunities either do not exist or are assumed to be randomly distributed across
the population. Entrepreneurial behaviour is transitory and some people are more tend to show
that behaviour in situations.
- Entrepreneurship does not require, but can include, the creation of new organizations.
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, - Entrepreneurship is a mechanism by which society converts technical information into these
products and services.
- Entrepreneurship is a mechanism through which temporal and spatial inefficiencies in an
economy are discovered and mitigated.
Because of the range of options and the consequences of exploiting new things are unknown,
entrepreneurial decisions cannot be make through an optimization process in which mechanical
calculations are made.
Drucker has described three different categories of opportunities:
1. The creation of new information, as occurs with the invention of new technologies.
2. The exploitation of market inefficiencies that result from information asymmetry, as occurs
acres time and geography.
3. The reaction to shifts in the relative costs and benefits of alternative uses for resources, as
occurs with political, regulatory, or demographic changes.
When buyers and sellers have different beliefs about the value of resources, the goods can sell above
or below their marginal costs. For entrepreneurship to occur the resource owners must not share
completely the entrepreneur conjectures because it is all about corporation and discussing about the
profit. Since decisions are not always correct, this process leads to errors.
Research has suggested two broad categories of factors that influence the probability that particular
people will discover particular opportunities:
1. The possession of the prior information necessary to identify an opportunity;
2. The cognitive properties necessary to value it.
Human beings all possess different stocks of information. People must be able to identity new means-
ends relationships that are generated by a given change in order to discover entrepreneurial
opportunities. People differ in their ability to identify such relationships. The reason why individuals
exploit opportunities and others don’t, again appears to be a function of the joint characteristics of
the opportunity and the nature of the individual. Several researchers have argued that individual
differences in the willingness to bear risks influence the decision to exploit entrepreneurial
opportunities. The difference in optimism is also a factor.
Lecture 1 Article 3, Understanding the dynamics of entrepreneurship through framework
approaches, Kuratko, D.F., Morris, M.H., & Schindehutte, M. (2015).
An entrepreneurial revolution has spread throughout the world and entrepreneurs are an integral part
of the renewal process that pervades and defines modern economies. It has been argued that much of
what constitutes the field of entrepreneurship today is borrowed or adapted from other disciplines. A
theory of entrepreneurship is a verifiable and logically coherent formulation of relationships, or
underlying principles, that either explains entrepreneurship, predicts entrepreneurial activity or
provides normative guidance. Very important is that entrepreneurship is interdisciplinary. The field
needs to become narrower and more defined in focus. 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.
In taking stock of what is known about the field of entrepreneurship, a number of frameworks have
been produced. One way to examine these theories is with a “schools of thought” framework that
divides entrepreneurship into specific activities (Kuratko 2014):
- Environment: deals with the external factors that affect the motivation and ability to start a
venture.
- Financial/capital: based on the capital-seeking process.
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