Entrepreneurship MN3194, EMFSS, University of London, year
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Contents
Block 1: The History of Entrepreneurship ..................................................................................................... 2
History and Origins of Entrepreneurship .................................................................................................. 2
Common misconceptions ......................................................................................................................... 2
Block 2: The Economics of Entrepreneurship ............................................................................................... 3
The relationship between entrepreneurs and the economy.................................................................... 3
Creative Destruction ............................................................................................................................. 3
From Corporates to Smaller Firms ........................................................................................................ 3
The Agent of Change ............................................................................................................................. 3
Increase in Competition ........................................................................................................................ 4
Job Creation .......................................................................................................................................... 4
Increase in Productivity......................................................................................................................... 5
Structural Changes ................................................................................................................................ 5
What is detrimental to innovative entrepreneurship? ......................................................................... 5
Case study - European Union .................................................................................................................... 5
Hypotheses ........................................................................................................................................... 6
Conclusions ........................................................................................................................................... 6
Trending Research Topics in Entrepreneurship ........................................................................................ 6
Block 3 ........................................................................................................................................................... 8
Entrepreneurship Ecosystem .................................................................................................................... 8
Importance of Stability.......................................................................................................................... 8
Funding in the Entrepreneurship Ecosystem ............................................................................................ 9
VENTURE CAPITAL ................................................................................................................................. 9
The Venture Capital Industry Today ..................................................................................................... 9
PUBLIC SECTOR FINANCING ................................................................................................................ 10
Market access In the Entrepreneurship Ecosystem................................................................................ 10
Human capital in the Entrepreneurship Ecosystem ............................................................................... 12
Education in Entrepreneurship ........................................................................................................... 12
Accommodative policy and regulations.................................................................................................. 12
Ease of doing Business Index .............................................................................................................. 13
Case Studies of entrepreneur-friendly regulations and policies: The UK & Estonia........................... 13
Fostering the Development of Entrepreneurship: Accelerators and Incubators ............................... 14
,Block 1: The History of Entrepreneurship
History and Origins of Entrepreneurship
• There are more definitions of entrepreneurship than there are entrepreneurs in the world. In
order to settle for a definition for the purpose of this course, one could describe it as:
The general concept of using intelligence means to organise production into outputs, what to produce,
in what quantities, how production should take place and finally how to organise the process
economically to turn a profit.
• An entrepreneur is more than someone who launches and manages a business (an undertaker).
Rather they are someone who utilises innovation to bring change about in a certain field or area
and exploits change commercially.
One important element in our definition of entrepreneurs is that they deal with innovation, which an be
either a product or a process. So in this age of large-scale technology and globalization, entrepreneurs
are commonly linked with technology, but they don’t always have to be. Most entrepreneurs do not
make billions, most of them start small and end small or medium (i.e. 250 employees or less).
Common misconceptions
1- Great fortunes: Starting a business is a highly risky undertaking and can potentially lead to
bankruptcy and the loss of all personal assets in the worst case. On the other hand, starting a
business can potentially lead to wealth and fortune much quicker in comparison to classic
employment.
2- Higher pay than employees: This depends on the revenue the business generates and how much
the owner is able to draw down as a salary. Statistic show that an entrepreneur doesn’t make
significantly more than an employee.
3- It’s all about the money: The main driver for people starting a business is job satisfaction and
happiness. Wharton School of Business revealed a strong correlation between happiness and
entrepreneurship when not controlling for money or startup success. When not controlling for
income, people working for non-profits, the government and educational organizations turned
out to be the happiest. When controlling for income, however, entrepreneurs scored highest for
happiness. Conversely, one can conclude that people not working for non-profits, the
government or educational organisations and also not being entrepreneurs are the least happy
people.
4- Only for young people: According to a working paper by MIT Sloan professor Pierre Azoulay and
PhD student Daniel Kim (Somers 2018), the average age of people who started a company and
hired at least one employee is 42.
In addition to the average age they also learned those new ventures with the highest growth
had an average founder age of 45. The researchers further discovered that entrepreneurs were
125 % more successful if they had been previously employed the sector they started a business
in.
, Block 2: The Economics of Entrepreneurship
The economics of entrepreneurship is a scholarly field that aims to explain how economic conditions
and incentives affect entrepreneurship and how the actions of entrepreneurs affect the broader
economy in return.
The relationship between entrepreneurs and the economy
Creative Destruction
The notion that entrepreneurship has a positive effect on economic growth introduced by Schumpeter
(1934). His "Creative Destruction" describes the notion that entrepreneurs create “clusters of
innovations”. These clusters cause business cycles because their actions create “disruptive dislocations”
and arrive in huge waves. For example, Schumpeter sighted that the industrial revolution was kicked off
by entrepreneurs who invented new ways of production that outcompeted traditional ways.
Entrepreneurial activity contributes to the economy in the following ways:
1. Introduction of a new service new or a product innovation
2. New methods of production or new process innovation
3. Unlocking or creating new markets, new market resources input innovation
4. Organizational innovation (complete restructuring of an entire industry or the breaking up of a
monopoly)
Disruptive Innovation is not a breakthrough innovation but it transforms a product which used to be
unattainable but has become attainable to a wider audience due to innovation. It also causes a company
to go after new markets since the new product has become attainable for a new market. Examples are
mobile phones or laptops which used to be very expensive but are now mass products because of
cheaper supply chains and higher competition .
From Corporates to Smaller Firms
In the 1970s fundamental shifts in the world economy provided more opportunities for entrepreneurs
and smaller firms. Technological progress combined with unstable globalised markets in the 1970s
fostered flexible automation, resulting in the demise of mass production and promoted flexible
specialisation.
Four trends that aided the shifty were:
1. Increase in the supply of labour, leading to lower real wages coinciding with an increasing level
of education
2. Changes in consumer tastes
3. Relaxation of entry regulations
4. A period of creative destruction
The Agent of Change
In the area of disruptive technology smaller firms can have an unfair advantage by developing new
technologies at lower costs and with higher efficiency so that they outcompete larger firms.
For example, this effect could be observed when Apple took over the smartphone market with its
iPhone. Companies such as BlackBerry and Nokia were not prepared for such a novel product that they
struggled to adjust.
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