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Entrepreneurship: The Art,Science, and Plain Vanilla
Malin BrännbackSpring 2008
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Course Outline• W. 3; Jan 14,• Introduction,
EntrepreneurshipEntrepreneurial BusinessWhat is entrepreneurship– Opportunity recognition– The Idea, The Concept– Key learning note on
• Each articles 1,5, 11• Ch. 1 and 2
(Carsrud&Brännback,Entrepreneurship)
• Guest Lecture: AlanCarsrudEntrepreneurship, whatit is and what it isn’t
• W. 4; Jan. 21, Opportunityrecognition
• Key learning note on• Each articles 2, 6, 12,• Chapter 2 and 3 (Shane,
A General Theory ofEntrepreneurship)
• W.5; Jan 28• Entrepreneurial
Intentionality,Entrepreneurial cognition
• To be or not to be anentrepreneur– Key learning note on
• Each articles 13, 14,• Chapter 3, 4, 5
(Carsrud&Brännback,Entrepreneurship)
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Course Outline• W.6; Feb 4, The Idea, The
Concept, The Market – it is alot more than just potential
– Key learning note on• Each article 4,15
– Ch. 6, 7 (Carsrud & Brännback,Entrepreneurship)
– Chapter 4 and 5 (Shane, AGeneral Theory ofEntrepreneurship)
– Hand-out of GR-1 assignmentto be prepared in pairs and tobe handed in on March 10
• Cases Wedgewood,Heinz, Estee Lauder
• W.7; Feb. 11. AcademicEntrepreneurship, UniversitySpin-offs, Innovation Systems
– KLN on articles 3,9,10– Guest lecture CEO Markku
Jalkanen, FaronPharmaceuticals
• W. 10; Mar 3. AcademicEntrepreneurship, UniversitySpin-offs, Innovation Systems– Key learning notes on
• Ch. 2,3, 7, 8 FromShane: AcademicEntrepreneurship
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Course Outline• W. 14; Mar.31
Entrepreneurship and Growth– Key Learning Notes on– Articles 8,16– Chapter 2 and 3 (Shepherd&
Wiklund; EntrepreneurialSmall Business
– Hand-out of Business plans• Each group will read one full
plan and one executivesummary
– GR-2 assignment. Prepare inpairs an evaluation of oneBusiness plan, to be handedin and prepare to discuss.April 14 short evaluation ofthe other 3 exec.summary
• W. 15; Apr.7, FamilyBusiness– Key Learning Notes on
articles 7 and 17– Ch 10 (Carsrud &
Brännback)– guest lecture CEO Timo
Ketonen, Hansaprint Ltd.• W. 16; Apr. 14• Plain Vanilla; Business Plans
• Individual assignment to behanded in W.17 Friday at15.00
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Large Individual Assignment
• You will write a course paper on atopic assigned by the courseinstructor.
• More information at the start of thecourse
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Key Learning Note• A key learning note is not a summary of the content of the article.
It includes your reflections on the text; on the things that you foundparticularly interesting or puzzling.
• What did you learn from the text? You should reflect on yourpersonal perceptions and interpretations of the presentedargument.
• Do you agree or disagree with the author’s arguments, and why?Your text needs to be structured in a systematic manner, NOTPRESENTED AS CHECKPOINTS.
• At least, reflect upon the following questions (do not use them asheaddings)
– What are the researchers basically debating about?– Whose view do you agree with and why?– Maximum length per KLN 1000 words.– You are to write a KLN per article and/or chapter, i.e. if you are
assigned 5 articles + 2 chapters it means 7 KLNs
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Assignments, and Grading• A: 2 Group assignments, max. 60p (15%)
– w. 10: Wedgewood, Heinz, Estee Laudeer, etc 20p– w. 16:Business Plans 40p
• 30 p for full analysis• 5p for analysis of two executive summaries
• B: 10 Individual assignments, max. 190p (47.5%)• w. 3. 5p/article/chapter + guest lecture 5p = 30p• w. 4. 25p• w. 5 25p• w. 6 30p• W.7 15p + guest lecture 5p = 20p• w. 10. 20p• w. 14 20p• w. 15. 15p + guest lecture 5p = 20p
• C: 1 Large Individual assignment, max. 110 points (27.5%)• D: Participation 40 points (10%)• Total 400 p. 200 points required for pass, min. 50% of each
assignment. NO EXAM
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IN 1874….SAMUEL CLEMENS WROTE…
TRYING TO GET THE HANG OF THIS NEW FANGLED MACHINE....[IT] COSTS 125 DOLLARS. THE MACHINE HAS SEVERAL VIRTUES. I BELIEVE IT WILL PRINT. FASTERTHAN I CAN TYPE…IT PILES AN AWFUL STACKOF WORDS ON A PAGE
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Entrepreneurship
• What happens when entrepreneursact?
•• Why do they Why do they act?act?• How do they act?
Asking WHY tended to be Answered with WHO•Attempts to identify certainpersonality traits that differentiate entrepreneursfrom non-entrepreneurs
•Turned out to be fruitless
•There is no such species
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Just how large are the small• There were approximately
22.9 million smallbusinesses in the US in2002
• Approximately 75 percentof all net new jobs areadded by small firms
• Small firms represent 99.7percent of all employers
• Small firms employ 50.1percent of the privateworkforce
• Small firms account for 52percent of the privatesector output in 1999
• Small firms represent 97percent of all US exporters
• Today’s Fortune 500companies employ fewertotal employees than theydid ten years ago – a trendthat has been going on forthe past 20 years.
• Small firms are moreefficient in many ways thanare large counterparts. Onaverage small firmsproduce 13 to 14 morepatents per employee thando large firms.
• Small firms are able torespond more quickly andto operate more efficientlyand this is one reason forthe growth of smallbusinesses
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Firms Evolving - the dominance of the minority
• Most firms aresmall– Corporations
constitute aminority of allbusinesses
– Publicly tradedfirms are a minorityof all corporations
• Large firms makeout 4% or less ofall firms
• But: they dominateeconomically ifmeasured byassets
• Small firms aresignificantemployers
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Firms Evolving - the dominance of the minority
• 1 in 100 business plans getfunding
• Most firms start out small;change little if at all!
• Most firms never add moreemployees.
• Of those that grow only 3%add more than 100employees
• Starting a firm is notnecessarily expensive:– Over 60% required less
tahn $5,000– 3% required more than
$100,000– Less than 0.5% required
$1M or more• The probability of self
employment dependsheavily on– Inheritance or gift
• Most start with almostnothing in the way ofassets
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Finland - today
• Approx. 224265 Co’s• 97.5% are SME’s
– Turnover not exceed €40 miljoner– Personell below 250– Balanse not more than €27 miljoner
• Family businesses 72% (161106)• Majority 86% (192644) micro firms
with less than 4 persons
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IN FINLANDIn 2000 there were222817 companieswhich employed1,301419 persons, with aturnover of €262 million
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The corporate structure of Finalnd in2000 (Pki-Ytkkk/Tukkk)
0 % 20 % 40 % 60 % 80 % 100 %
Yritykset
Henkilöstö
Liikevaihto
0-9 10-49 50-249 yli 250
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Isn’t it a bit strange that mostof our textbooks and what weteach is about an outlayer??
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Some definitions• Joseph Schumpter (1934)
...the entrepreneur is theman who gets new thingsdone.
• Most refer to Schumpeter• Schumpeter’s
entrepreneur is aninnovator;
• Peter F. Drucker (1985)...activity of systematic
innovation.
• In my opinion the bestdefinition
“The pursuit ofopportunitybeyond theresources youcurrently control”
Professor Howard StevensonHarvard Business School
• Can be used on large andpublic organizations
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Opportunity recognitionThree schools• (i) the Equilibrium school
– assumes that everyone canrecognize all entrepreneurialopportunities and that whetherthis actually takes place isdependent on fundamentalattributes of people.
• (ii) the Psychological school– that fundamental attributes of
people, rather than informationabout opportunities determinewho becomes an entrepreneurand this again depends on aperson’s willingness and ability totake action
– Entrepreneurial intentionalitystudies and it has been arguedand shown that attitude towardsbehavior, social norm, andperceived behavioral controlinfluence a person’s intentions toact
• (iii) the Austrian School,– builds on the idea of information
asymmetry as the driving force. Peoplecannot recognize all entrepreneurialopportunities, and that informationabout opportunities will driveentrepreneurial opportunity recognitionrather than a willingness to take action
– Schumpeter (1934 and Kirzner(1973,1979).
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Opportunity Recognition• Schumpeter – not really the Austrian school; the
entrepreneur is an innovator who shifts the curves of costsand revenues through innovation
• Kirzner - entrepreneur as an actor in the process-consciousmarket theory who exhibits deliberate behaviors who seesthat the curves have shifted; spots market ignorance
• Read Ch. 3 in Delmár et al 2005
Limited discoveryInvolves creation
CommonRare
Less innovativeVery innovative
Does not require new knowledgeRequires new knowledge
EquilibratingDisequilibrating
Kirznerian opportunitiesSchumpeterian opportunities
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OPPORTUNITIES• Good scientific outcomes are not always good
opportunities nor viable business concepts.• Concepts are built using science &
entrepreneurial creativity - in real time and taketime.
• Opportunities are attractive, durable, timely, andanchored in a product or service which creates oradds real value for its buyers and end users.
• Viable business concepts provide NeedSatisfaction, Pain and/or Suffering Relief.
• Opportunities yield measurable net benefits to theentrepreneurial team and to society.
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But, an entrepreneur is rarelyan innovator• Most firms replicate• Most entrepreneurs
replicate and copy
• Kirzner may be amore suitabloeintellectual father– Kirzner’s entrepreneur
is entrepreneuriallyalert
– Sees opportunities thatnobody else sees andacts upon theseopportunities
Entrepreneurship may but does not have to mean
innovation
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“There are more things in heaven and earththan are dreamt of in your philosophy.”
“It was the best of times, it was the worst oftimes, it was the age of wisdom, it was the ageof foolishness, it was the epoch of belief, it wasthe epoch of incredulity, it was the season oflight, it was the season of darkness, it was thespring of hope, it was the winter of despair, wehad everything before us, we had nothingbefore us, we were all going direct to heaven ,we were all going direct in the other way.”
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Let’s look at the history oftechnological change..• The past informs
the present and thepresent illuminatesthe past
• Cases: Wedgewood,Heinz, Estee Lauder
• You will need to lookinto a firm’s or anindustry’s historicaldevelopment in orderto spot discontinuitiesor other major breaks
• Find out about theirpast leaders
• Look into develop-ments in society atlarge
• Get the big picture!
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Times of Change• The emergence of the Internet is said to be the
greatest change ever.• Scientific advances in biotechnology is said to
have the most profound change on man nowand in the future.
• It depends on your reference point!
• Major technological breakthroughs tend tochange industries, business, society, etc – butchange is incremental (mostly)
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Eras of Change
Reference: R Boulton & al. Cracking the Value Code an Arthur Andersen publication
Time
Valu
e C
reat
ion
StoneAge
IronAge
AgriculturalAge
IndustrialAge
TechnologyAge
KnowledgeAge
BiotechAge
Course outlineAssignmentsIntroductionTech change
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Technological change
• However, the market is almostnever where the inventor thinks itwill be.
• Although the feelings about hypeappears to create the same kinds offeelings regardless of time
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150 years ago!• The Industrial revolution – nothing much
happened before the railroads camealthough the steame engine was theinvention enabling the REAL change:
• The communications and transportationrevolution– telegraph and railroads– City of Chicago population soared; 1850
29,963; 1870 298,977; 1890 1,099,850; 19102,185,283• 104 trains came and left Chicago per day in
1856
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Technological change• The Internet would not have been without the
invention of the computer or even the coming ofthe PC back in the 1970’s– Paul Freiberger and Michael Swaine: Fire in the Valley
• and ultimately the World Wide Web 1989, whichneeded an interface – the Mosaic in 1992
• So, the major invention was the computer,needing the combination of a whole array of priorinnovations assembled together for creating acommodity – and now all hell’s loose.
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Views of technologybusiness• A Technologists view
If a man makes a bettermousetrap than hisneighbor, though he
builds his house in thewoods, the world willmake a beaten path to
his door.
Ralph WaldoEmerson
• A Market-Oriented view
The manufacturer whowaits for the world to
beat a path to his door isa great optimist. But the
manufacturer whoshows this “mousetrap”
(and its value) to theworld, keeps the smokecoming out his chimney.
O.B. Winters
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Entrepreneurship
• What happens when entrepreneursact?
•• WhyWhy dodo theythey act? act?• How do they act?
Intention-based modelsGive a theory-driven Framwork to studyWhy people act
•Well tested•Best at predicting futureaction
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Intention-based models
• Action is a social cognitive process• Ajzen’s (1987) Theory of Planned
Behavior och Shapero’s (1982)Entrepreneurial Event model
• Studies the perceptions ofopportunities by individuals
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The Intentions models• The entrepreneur is in the
center.– People innovate, people
have ideas.Organisations areinnovative only if peoplehave ideas
• Entrepreneurial potentialexist only if there arepotential entrepreneurs
• We perceive anopportunity only if it ispositive and controlable
• An intention becomesaction only if perceiveddesirable and feasible
• Locus of control is dependenton self-efficacy
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The nature of intentions
• Absent intention, action unlikely• Intentions represent the belief that I
will act.• Action requires effort: if we are to try,
we must first intend to try
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The Model
Entrepreneurial intent
Perceived personalfeasibility
Perceived personal desirability
Attitudes
Social norms
self-efficacy
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This all becomes interesting, when
• Finland for the 4th consecutive year themost competitive; the 4th most innovativecountry in the world
Today, there are 20 universities with a total of 163,000 students and 19,000 new students enrolled each year.
Additionally, there are 30 polytechnic colleges with some 120,000 students. In 1982 the first science park was established and
today there are 22 science and technology parks with 550 employees and an annual turnover of €100 million providing 1,000,000 m2 of facilities, where 1,600 firms
and organizations, and 32,000 are active. All of this, in a country with a population of 5.2 million.