BRIDGING THE GAP:

Transforming Knowledge into Action through

Gaming and Simulation

Proceedings of the 35th Conference of the

International Simulation and Gaming Association,

Munich, 2004

Edited by Thomas Eberle, Willy Christian Kriz, Matthias Puschert & Fabian Glötzner

BRIDGING THE GAP: Transforming Knowledge into Action through Gaming and Simulation

Proceedings of the 35th Conference of the International Simulation and Gaming Association, Munich, 2004

Edited by Thomas Eberle, Willy Christian Kriz, Matthias Puschert & Fabian Glötzner

Design and Layout: Adrian Döge

Copyright and Publisher: SAGSAGA – Swiss Austrian German Simulation And Gaming Association; (Gesellschaft für Planspiele in Deutschland Öster-reich und in der Schweiz e.V.); Munich, Germany; www.sagsaga.org

ISBN: 3-00-013989-3

No parts of this work may be reproduced or transmitted in any form or by any means, electron-ic or mechanical, including photocopying, recording, or any information storage and retrieval system, without written permission from the copyright owner.

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The Benefits of Simulations in Entrepreneurship Education: Presentation of a Start-Up Simulation Approach and First Evaluation Results

EBERHARD AUCHTER & MORITZ KEDING

1. IntroductionIt is very common to argue that traditional teaching methods (i.e. lectures, case studies etc.) cannot meet the requirements of an entrepreneurship edu-cation, but business simulations can help to compensate these deficits (e. g. Klandt, 1994; Pammer, 2000). An important advantage of business simu-lations is the “learning-by-doing”-aspect: The learner becomes an actor in a (more or less) realistic start-up situation and environment. Compared to traditional teaching methods, actions and feedback from those actions are the central asset of the teaching procedure. Proceeding from the idea, that beside technical and social competences, successful entrepreneurs need the so called conceptual competences (conceiving the core entrepreneurial abili-ties, like visionary and strategic thinking etc; Katz, 1974), business simula-tion methods address all of them (Auchter, 2001).

This paper will examine the benefits of a specific start-up simulation in en-trepreneurship education. After the presentation of the TOP-SIM Startup simulation approach, results of the evaluation comprising the acceptance and the subjective benefits for the participants of simulation seminars will be introduced in a first step. The second evaluation approach focuses on the question of how the business simulation can contribute to the improvement of the entrepreneurial competences and entrepreneurial orientations. Since the evaluation has just started, the concept and the probably first available results will be presented.

2. The Business Simulation “TOPSIM -Startup”

2.1. The Basic Concept “TOPSIM-Startup!” is a strategic entrepreneurship simulation which was jointly developed by the University of Applied Sciences Regensburg, Tertia Edusoft GmbH, (former Unicon Management Development) and the Hans Lindner Institut, a foundation established by an successful entrepreneur to support the start-up idea.

The modular set-up of the simulations offers a wide variety of uses in dif-ferent businesses: Trade (E-Commerce), Service (Fitness-studio), Production

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(High-tech sport goods) (www.unicon.de). A strong emphasis is put on a realis-tic simulation of the start-up phase within the first 2 years of a new venture.

• Initial Phase: The entire process of starting a new venture is simulated: starting from the business idea, covering the writing of the business plan and leading to the actual incorporation of the company.

• Competition Phase: After the incorporation, the business concept has to be put to work in a very competitive environment. Up to five teams will be competing against each other for up to eight quarters (2 years).

2.2. The Start-up Simulation “Production”Topic of this simulation is the manufacturing industry. The business idea is starting a small business, which produces high tech bikes and sells the bikes first in an own shop and then later on other sales channels. Among the critical company-controlled success factors are: strategy and strategy im-plementation, the use of market channels, level of product technology (i.e. expenditure on R&D), productivity, market shares, public reputation. The participating teams will go through five distinct phases:

(1) Information gathering: The business idea has to be checked for feasibili-ty. Criteria are for example: size and development of the market, unique sell-ing proposition, required investments. A simulated internet environment, the “Startup-Web”, is available to the teams, providing a huge amount of information with different degrees of quality and relevance.

(2) Business plan: a comprehensive business plan has to be prepared. This work will be supported by an electronic business plan-assistant. This tool gives structure to the input and will do calculations and connections. This business plan has to be presented by the start-up teams and will be the basis of decision to obtain venture capital and special loans. These negotiations will be followed by the actual

(3) Incorporation: decisions such as the legal form, renting office space, buying business equipment, hiring and training staff have to be made.

(4) Entering the market: up to five teams are competing in a virtual market for up to eight quarters. Each team has to decide on a quarterly base. These decisions comprise classical decisions such as purchasing, personnel, invest-ing in machinery capacities and financing, but also specific decisions related to the start-up situation such as marketing mix in the market entry phase. The challenges for the start-up teams are:

• Estimating the impact on their decisions in a very dynamic market with strong seasonal fluctuations.• Coping with frictions typical to a start-up, such as lack of room, lack of staff, strong turnover of employees.

A detailed reporting system - ten individual reporting-domains for each team - support the decision-making and the feedback process. This resembles the

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internal and external reports as well as market reports typical for the indus-try.

(5) Closing/ Measurement of Success: After eight simulated quarters, the question on how to measure entrepreneurial success comes up. Available cri-teria are for instance:

• Survival/Absence of adjudication• Return on sales/equity• Cumulated profit after tax• Increase of shareholder value• Number of jobs created

The winning team is the one showing the best performance related to one or a mixture of the criteria above.

2.3. Seminar conceptsThe simulation can be implemented in a 2 or 3 day seminar, depending on the knowledge base of the seminar participants and the size of the groups. In universities often the simulation takes place as term-long seminars, encom-passing the entire semester, accompanied by “teaching modules” on relevant start-up and management topics.

2.4. Goals of the business simulation “Startup!”(1) Primary goals

The main intention of the simulation is to teach entrepreneurial experienc-es, to motivate students to start their own business and to prepare partici-pants for their own venture. This implies the following learning goals for the simulation.

(2) Learning Goals of the Simulation

Getting to know and to use tools for management decisions as well as recipi-ent-oriented business-plan-writing. This involves to a high degree technical skills while practising team work is mainly taking social skills into account. The training of entrepreneurial thinking and acting in a start-up situation is one of the most important goals of this business simulation. This issue and the coping with very complex situations, test and educate the conceptual skills in this respect. A better understanding of one’s own entrepreneurial abilities (and deficits) might be the first (or the last) step of thinking about one’s own entrepreneurial career.

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3. First Evaluation Stage: Acceptance and Benefits of TOPSIM Startup! Simulation

3.1. Concept and DatabaseIn a first step some basic assessment about the acceptance and the subjec-tive benefits of the TOPSIM - Startup! simulation for the participants are examined. In five universities, ten seminars have taken place in winter term 2003/04. A questionnaire at the end of the seminars constitutes the data base (Keding, 2004). Eight questions relating to this issue will be analysed. The scale of answers ranges from: agreement, partly agreement, indifference , rather no agreement to no agreement.

No. of Persons* No. of Persons*

Sex class duration

Male 80 Regular class (semes-ter)

98

Female 54 Compact class (2/3 days)

35

TOTAL 134 TOTAL 133

Study level Field**

Undergraduate study 16 Business students 110

Graduate study 107 Technical students 12

Non students 12 Non students 12

TOTAL 135 TOTAL 134

Table 1: Database/Characteristics; * data available; **for some statements the data base is ex-tended by 35 graduate technical students which attended compact seminars

3.2. Acceptance of the Startup Simulation(1) Handling of the Simulation Software

The statement was:” The handling of the software is easy and intelligible. Nearly 90% of the interviewed persons felt comfortable or nearly comfort-able with the software handling. Especially graduate students seemed to have hardly any problems with it.

Figure 1a/b: Handling of the simulation software

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(2) Degree of Realism of the Startup Simulation

To the statement: ”The simulation reflects the activities of a start-up com-pany in a realistic way”, only 9% answered with rather no agreement or no agreement. Nearly 80% see the simulation in a positive way close to reality. Especially undergraduate students are more sceptical with the close to reality approach of the simulation than graduate students, and business students have seen the simulation more realistic than the technical students (80% versus 42%, agree and nearly agree). This may depend on the inferior practi-cal business experience of the undergraduate and technical students.

Figure 2: The simulation reflects the activities of a start-up company in a realistic way

(3) Degree of Fun with the Startup Simulation

More than 90% of the participants of the simulation seminars agreed fully (73%) or nearly fully (20%) that the work with the start-up simulation was fun. And this result applies nearly to all classifications mentioned above. Only for the students of the compact classes, the full agreement to this ques-tion sank to 48%. The relatively small time frame for the complex simula-tion is an explanation for this difference. This tendency grew, when techni-cal students attended compact classes.

Further results show that participants of the compact classes have more time problems than the students in regular classes encompassing the entire se-mester. This group has also been much more satisfied with the lecturer than the members of compact classes (it was in all classes the same person). Due to the restricted time capacity of the lecturer, he could not fulfil the consult-ing wishes of the participants of the compact classes.

(4) Results/Summary

Altogether a high level of acceptance of the start-up simulation can be per-ceived. As a consequence of these results it can be stated: The use of start-up simulation in compact classes and seminars should be adjusted carefully to the knowledge base of the students, especially to the level of the technical students

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3.3. Benefits of The Startup Simulation Classes Having been asked for the benefits of the start-up seminars, the participants gave a subjective estimation of their benefits. In this part of the evaluation an objective gain of the simulation seminars for the participants – e.g. in form of tests, before and after the simulation, was not intended. Five ques-tions and statements to this complex will be introduced and discussed.

(1) Improvement of Understanding for Entrepreneurial Thinking and Acting

Nearly 90% of the questioned persons voted “fully agree” or “partly agree” for the statement: “The seminar has improved my understanding for entre-preneurial thinking and acting”. And there wasn’t anybody who didn’t agree at all. This evidence is valuable for all classifications.

Figure 3a: The seminar has improved my understanding for entrepreneurial thinking and act-ing /b: The seminar has improved my understanding for entrepreneurial thinking and acting (Wirtschaft/Technik)

But the evaluation results show, that the degree of agreement of the under-graduate students is not that distinctive than the one of the seminar partici-pants on the graduated level. Beside the small data base for undergraduate students (15%), a reason might be the lack of business knowledge to see the entrepreneurial context. A similar tendency shows the analysis of the classifications: persons with technical or business background: The techni-cal students improved their understanding for entrepreneurial thinking and acting less than the business students. Explanation can go into the same direction as above: deficits in management methods. Furthermore a connec-tion between the duration of the seminars and the technical background of the participants can be identified. Technicians having attended a compact seminar had a smaller benefit, than the other groups of classifications. In the extended database (plus 35 technical students, visiting a compact semi-nar) this tendency is shown dramatically. (Chart 3b). The additional data come from two seminars, and influences, like the compulsory character of the seminars may be responsible for this constellation.But the confidence coefficients shows only weak dependencies between the classifications (see appendix 1) on the standard data set.

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(2) Preparation for the Problems of Management

More than half of the questioned persons fully agreed with the statement: “I am better prepared for the questions managing a company than before the start-up seminar”. And there wasn t anybody who did not agree. This tendency can be identified in all classifications (see appendix 1). The slight differences between the characteristics can be explained exactly like above.

Table 1: Appendix 1

(3) Fulfilment of the Participants Expectations

87% of the members of the analysed classifications see their initial expecta-tions of the seminar fulfilled (51%) or partly fulfilled (36%). No person was totally disappointed and only 11% have been indifferent on that question. Significant differences between the classifications couldn t be identified.

(4) The Use of Theoretical Know-How to Solve “Practical” Simulation Prob-lems

This item shows significant differences between business and technical stu-dents. Especially the latter seemed to have problems to use management knowledge in the simulation. But even business students had difficulties to make use of their theoretical know-how in “practical” management prob-lems. The reason may be a lack of knowledge (especially technical students) and/or a “transfer gap” applying their knowledge in a “real” situation. Fur-thermore students attending regular classes, were able to use more of their theoretical knowledge than the participants of the compact classes. Though this group consists of more technical students, the accompanying lessons in this kind of seminar are not very intensive.

(5) Effect on the Interest in Rising a Company

More than 2/3 of the questioned persons see an increase of their interest in the start-up business, but another1/3 are indifferent or see that prevailing point not confirmed. Looking at the mainly affected classifications, follow-ing differences can be identified: The interest in rising a company soared during the simulation seminar

• more among the male students than among the female students

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• more among the graduate students than among the undergraduate stu-dents

• more among business students than among technical students• more among students regular classes than those of the compact classes

The reason for some of these tendencies can be interpreted as follows: Due to the theme as being a prevailing business matter and a possible career perspective, more business students and students of the graduate studies are reached with this topic. And: regular classes transfer the subject more inten-sively than compact seminars.

(6) Summary

To sum it up one may say, the start-up seminars provide good benefits for participants in all introduced topics. It seem s to be a good instrument to prepare and motivate students for the start-up business.

4. Second Evaluation Stage: The Effect on Entrepre-neurial Competences by TOPSIM-Startup Seminars

4.1. Conception of the evaluation approachThe second evaluation approach focuses on the question of how the business simulation TOP-SIM Startup can contribute an improvement to the entrepre-neurial competences and entrepreneurial orientations. This evaluation refers as well to the analysis of the effects of the simulation (reaching important learning goals, support the motivation for start-up activities, etc.) as to guard the quality assurance of simulation activities. Until now, there is little empiri-cal evidence about the contribution of business simulations to entrepreneur-ial competences. This evaluation approach is unique in the German speak-ing area and was designed in collaboration with Dr. Willy Kriz, Department of Psychology, University of Munich. The evaluation started in the summer semester 2004 with more than 200 seminar participants from different fac-ulties, levels in course of studies and different seminar approaches.

Entrepreneurship research shows, that successful entrepreneurial activities are based on a specific bundle of competencies and motivations interacting with personality factors. (Gemünden, 2003; Frank, Korunka & Lueger, 2002). Relating to these findings it is to examine, to what extend the competencies and orienta-tions will and can be influenced by the TOPSIM Startup Simulation (Auchter, 2001). In this context the question will be traced, how strong the shaping of these factors and start-up related personality factors correlate with the entre-preneurial success (here the firm s success in the simulation; Klandt, 1998). The following dimensions will be considered in this evaluation approach:

• Knowledge and method competences e.g. business plan writing, ac-countancy methods

• Social competences, e.g. team capability, communication skills

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• Entrepreneurial competences, e.g. proactivitity, risk taking, innovation• Entrepreneurial basic disposition, e.g. achievement motivation• Entrepreneurial orientation u. -motivation, e.g. desire to start one’s own

business, need for independence

In addition the evaluation approach takes into consideration “moderate vari-ables” like, quality of the seminar lecturer, attitude to and formerly experi-ence with simulations, etc.

4.2. Goals of the Evaluation ApproachImportant goals and aspects of the evaluation are:

• To what extend does the simulation experience lead to a change of start-up related competences, depending on type of seminar, course of stud-ies, etc.

• Which connections exist between simulation success and the entrepre-neurial competences plus the Entrepreneurial basic disposition

• How does the simulation experience affect the entrepreneurial motivation• Which seminar concepts and - configrations are specially suitable to

improve entrepreneurial competences and - orientations • Which target group has the highest potential for entrepreneurial education • How strong is the acceptance of the start-up simulation

4.3. Method basisTo realise the study, the questionnaire was newly developed by W. Kriz, based on the findings of the topical research literature (Moser, Batinic & Zempel, 1999; Koch, Kaschube & Fisch, 2003; Lang von Wins, 2003). Additionally the short form of F-DUB (questionnaire for the diagnosis of entrepreneurial potential by Müller 2002, 2003) is in use.

A specific feature of the evaluation design is, that a survey takes place before, during and at the end of the seminars to record the change of competences and orientations. In addition a specific encoding system maintains the op-tion to question the seminar participants at the end of their studies and even after they have left university. This will be a basis of a later phase of the project, to control the prediction validity of the start-up success in the simulation in relation to real start-up success.

4.4. DatabaseWithin the scope of the promotion scheme EXIST Transfer of the Federal Ministry of Education and Research to support the entrepreneurial educa-tion and orientation in Universities, the initiative GROW in Eastern Bavaria carries out TOPSIM Startup simulation seminars at 5 Universities with about 600 students in the next two years. The University of Applied Sciences in Regensburg with the Business Simulation Center is responsible for this part of the measurement.

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4.5. First Outlook Until June 2004 a part of the questionnaire for the summer semester has been evaluated. An early analysis confirms basically the tendencies found in the first evaluation stage. This applies especially on the statement for the technical students. In the first evaluation stage, the database for this group was to small to attach great importance to conclusions about this classifica-tion. Further results will be available in August 2004.

References Auchter, E. (2001) Die Vermittlung von Gründungskompetenzen durch Unternehmensplan-

spiele. Die Neue Hochschule, 12/2001, Heft 6.

Frank, H., Korunka, Ch. & Lueger, M.,(2002). Entrepreneural Spirit, Unternehmerische Orientie-rung und Gründungsneigung von Studierenden. Wien.

Gemünden, H.-G.,(2003). Personale Einflussfaktoren von Unternehmnsgründungen. In: Ach-leitner, A.-K., Klandt, H., Koch, L.T. & Voigt, K.-I., Jahrbuch Entrepreneurship 2003/04. Berlin.

Katz, R. L. (1974). Skills of an Effective Administrator. Harvard Business Review, 52, 5, 90-102.

Keding, M. (2004). Analysis of 10 Start-up Seminars in 5 Universities – First Results, Unpublished Presentation at the University of Applied Sciences, Regensburg, Department of Business Studies.

Klandt, H. (1994). Methods of Teaching: What is Useful for Entrepreneural Education? In: Klandt, H., Mugler, J. & Müller-Böling, D. (Eds), Internationalizing Entrepreneurship Education and Training (pp. 34-43). Dortmund.

Klandt, H. (1998). Entrepreneurship spielend lernen. In: Faltin, G., Ripsas, S. & Zimmer J. (Eds.), Entrepreneurship (pp 197-216). München.

Koch, S., Kaschube, J. & Fisch, R. (2003) (Eds.). Eigenverantwortung für Organisationen. Göttingen.

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Müller, G.F. (2003). F-DUP. Fragebogen zur Diagnose unternehmerischer Potenziale, Koblenz-Landau

Müller, G.F., Garrecht, M., Pikal, E. & Reedwish, N. (2002). Führungskräfte mit unternehm-erischer Verantwortung. Zeitschrift für Personalpsychologie, 1.

Pammer, H. (2000). The Didactic Benefits of Business Simulations, paper presented on the IntEnt 2000, Internationalizing Entrepreneurship Education and Training.

Ripsas, S. (1998). Elemente der Entrepreneurship Education. In: Faltin,G., Ripsas, S. & Zimmer J. (Eds.), Entrepreneurship (pp. 217-234). München.

Tertia Edusoft (2001). Unternehmensplanspiel: TOPSIM - Startup!, Handel, (E-Commerce) Release 1.1. Tübingen.

Tertia Edusoft, (2003). Unternehmensplanspiel: TOPSIM - Startup!, Produktion, Release 3.0.1. Tübingen.

Wins, L. v. (2003). Founders Check. In: Erpenbeck, J. & v. Rosenstiel, L. (Eds.), Handbuch der Kompetenzmessung. Stuttgart.

AuthorsPROF. DR. AUCHTER, EberhardKEDING, Moritz University of Applied Sciences Regensburg, Department of Business Studies Seybothstr.2, 93053 Regensburg, Germany Email: eberhard.auchter@bwl.fh-regensburg.de

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