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Define the concept of corporate entrepreneurship and discuss measures to remove barriers hindering its development.
Every economy needs to be dynamic. To achieve this, there must be continuous innovation when it comes to the provision of services, products, and processes and also in establishing new business organizations. The formation of new businesses and innovation can be initiated at the individual level in what is referred to as individual entrepreneurship, or it can be done by existing organizations in what is known as corporate entrepreneurship. The latter is very useful as a tool for rejuvenating firms and giving them a new direction. It is adequately used by innovative managers to develop business, grow revenues, enhance profits and pioneer the development of novel products and processes.
Based on the above information, we can determine that corporate entrepreneurship is an ongoing process within an existing firm that leads to the creation of new ventures, products, and processes. Additionally, corporate entrepreneurship renews business strategies and brings a competitive edge to the firm. It is therefore a product of a companys venturing, innovation and renewal efforts over a period of time. Corporate entrepreneurship is highly dependent on the availability of resources and the persons tasked to control them.
Entrepreneurial managers are those who are able to acquire and use new technical knowledge to solve company problems or increase the firms output. As such, corporate entrepreneurship is highly reliant on the employment of tangible assets such as financial physical, and labor resources and also intangible resources such as social, intellectual, and human capital. However, the intangible assets can be said to be more important since entrepreneurship is highly dependent on human skill and capacity for innovation. Human capital refers to the knowledge, capabilities, skill, and experience of the organizations employees without regard to rank or file.
Intellectual capital in corporate entrepreneurship is the collective embodiment of organizational knowledge while social capital is the asset acquired by the creation of synergistic and harmonious social networks. There is a need for the three forms of capital to collaborate to achieve an entrepreneurial goal. The organization that has an advantage is that which employs all its intellectual, human, and social capital towards the development of new strategies and attainment of greater goals.
Just like in any venture, there are barriers that seem to act against corporate entrepreneurship. Again, these barriers relate to the use of tangible assets and the employment of intangible assets. Barriers that result from tangible assets are; financial constraints e.g. low liquidity, insufficient assets, weak asset base, etcetera. The result of these barriers is the prevention of investments into new technology or ideas thus curtailing entrepreneurship. However, barriers related to tangible assets are not as serious as those related to intangible ones. This is because of the importance of the latter assets in enhancing entrepreneurship.
These barriers related to the intangible assets of human, social and intellectual capital include; poor communication, inefficient management, lack of creativity, inexperienced employees, and internal wrangles within the organization. These barriers prevent the effective coordination and implementation of strategic entrepreneurial plans in the company. Alternatively, they hinder the development of innovative ideas into a workable company strategy.
There are various ways to remove the above barriers. First, the organization needs to identify the particular areas that are holding back its forward movement. It is only after a comprehensive entrepreneurial health audit that the firm can establish the problematic areas and begin working them out. For problems related to tangible assets, the organization can employ the known financial resolution methods to improve liquidity or lower financial constraints. These methods may include cost reduction, corporate restructuring, debt maintenance, and strategic planning.
For those barriers that arise from the employment of the intangible assets of human, social and intellectual capital, there are several measures that can be taken to eliminate them. These measures are managerial in nature and they aim to improve employees motivation, level of skill, creativity, and team-building capacity. They include; introduction of proper communication methods, in-house training of workers to improve their skills, rewarding innovation, encouraging dialogue, employing creative staff, and using motivational techniques to improve human capital.
Conclusion
Corporate entrepreneurship can uplift the organizations profile greatly if properly employed. Since the most dynamic organizations survive in the long term, innovation is the driving force for a business firm to remain afloat despite tough competition in the industry.
Entrepreneurial failure is inevitable but predictable given its common causes, critically discuss and illustrate with examples.
Entrepreneurial failure is a devastating blow for any profit-oriented enterprise. It usually means that the plans that the individual or corporate body had put in place have backfired and the business has to start a new venture or wind up. However, the causes of entrepreneurial failure are known and thus entrepreneurial failure is predictable. Nevertheless, most individual and corporate entrepreneurs learn from failure and initial failure should not inform an entrepreneurs decision to wind up a business or quit being an entrepreneur.
Causes of entrepreneurial failure
There are many reasons why organizations and individuals decide to wind up existing businesses or shift to new ventures. While most of the problems leading to the shift or closure are predictable and avoidable, some of them are unavoidable e.g. destruction of business caused by political turmoil. The first of these problems are those related to management such as inefficiency, incompetence, lack of support, and inexperience. These problems can be easily remedied through managerial training and acquiring on the job experience.
Another cause of entrepreneurial failure that is more common is the individual factor. Most of the poor entrepreneurial decisions are made by individuals who are exposing the organization to their own personal weaknesses. Arrogance, lack of cooperation, lack of faith in employees, unreasonable risk appetite, engaging in illegal practices e.t.c. are all individual weaknesses that usually bring down the entire organization. The only way to solve this problem is through behavioral therapy, training, and modification. In some cases, it would be better for the company to dismiss the employee accustomed to making reckless decisions that cost the organization or those who engage in illegal activities.
Failure may also be occasioned by production problems especially where technical problems arise and the company incurs huge costs in solving them. However, production problems are easily solved by the hiring of competent engineers and employees who are able to report problems early before they bring production to a halt. Financial problems are another major cause of entrepreneurial failure. They are solved by seeking assistance from financial institutions and employing cost reduction and profit maximization measures. Other problems are industry-related e.g. where government policies are not business-friendly or where there is stiff competition in the market. The best method would be to lobby the government and to hire aggressive marketing agents but at times the only option would be for the firm to venture into a friendlier industry.
Examples of entrepreneurial failure
Perhaps the best example of corporate entrepreneurial failure is the much famed Fashion Cafe. The cafe was established by a group of models and celebrities led by famous restaurateur, Tommaso Buti. The cafe sold exclusive dishes such as fried appetizers and gargantuan burgers which were overpriced. However, the failure of the cafe was attributed to Butis mismanagement and illegal acts which eventually led to his arrest in 2000.
Another failure was that by Ford Motor Company when it launched its futuristic model, the Edsel. Despite Edsels posturing as the car of the future, the markets reaction to its release was downright cold. Eventually, Ford withdrew the model but it came at a loss of $250 million. The failure of Edsel was attributed to poor marketing strategy. The third big failure was the Betamax by Sony Corporation. While the video recorder was touted as being capable of recording over 3 hours of TV, the marketing of the product, its bulky size, price, and limited abilities eventually led to the product becoming a flop. Lastly, there is the much-publicized flop of Switzerlands national icon, SwissAir. While the company had originally been so successful that it was referred to as the flying bank, its failure was phenomenal. The company was too ambitious in its borrowing and eventually, it collapsed. The reason for its collapse was attributed to poor management and the September 11 attacks in New York.
In all the above examples, these companies could have easily foreseen that their entrepreneurial activities would eventually lead to failure. A good example is Swissair which was so reckless that it purchased fuel from each of its stops without consideration of losses accruing from differences in currency and price. Clearly, this could have been foreseen. As for Ford and Sony, they should have known that a new product needs aggressive marketing. For the Fashion Cafe, Buti could have predicted that his fraudulent ways could eventually catch up with him and he would sink with all his investments. These examples show that even though entrepreneurial failure has many causes. It can be predicted and remedied.
Conclusion
As seen above, it is possible to effectively predict the likely causes of entrepreneurial failure. The organization should therefore make a point of auditing itself to establish whether there are signs of any of the above problems and put in restorative measures before the actual failure occurs.
Critically discuss how cultural experiences may influence a persons propensity to behavior entrepreneurially.
There has been a lot of interest in the impact that culture has on the entrepreneurial capacity of a certain country or locality. The fact that different countries show different approaches to entrepreneurship has sparked debate on the causes of the disparity. Of all the reasons that could explain the difference, culture seems to be the most logical reason and the topic has received substantial scholarly interest as a result. The main areas that seem to be influenced by culture are innovation, risk taking, and the start-up of new business ventures. Data from different countries shows interesting results with regional, national and organizational cultures all having an impact on the entrepreneurial behavior of their members.
Study findings
Most studies have employed unique research methods that attempt to capture different cultural variables that can be statistically tested against particular entrepreneurial habits. While there have been few studies showing actual correlations between cultural traits and entrepreneurial outcomes, a few have shown that there is indeed a remarkable connection between culture and entrepreneurship.
The conflicting element in the available studies on culture and entrepreneurship is in the definition of culture. While some scholars seem to think that it is an unconscious process , others seem to think of it as a pattern of certain basic assumptions that are developed or invented by a distinct group of people in their ordinary way of life and as they try to adapt or cope to their immediate environments. Eventually, the pattern is considered to be valid and is passed to new members as the right way of thought, feeling, or action.
Certain cultural practices, norms, and values seem to have considerable effects on the individual entrepreneur. A good example of this is the fact that cultures that usually emphasize family unity and collective responsibility seem to do better when it comes to the aspects of entrepreneurship that require cooperation and teamwork. In contrast, individuals from cultures such as that of America that insist on personal and individual freedom seem to do much better in starting up businesses and coming up with new ideas and products.
The effect of culture on the individual seems to be mostly value-based. Individuals from cultures that emphasize high standards of morality seem to possess traits that are more related to good business practice such as honest dealing, sufficient pay for workers e.t.c. Other cultures that stress followership and obeying rules produce risk-averse individuals who are reluctant to start up new ventures and who prefer the proven methods of doing business. Again, individuals from freer communities that look more towards individual liberty rather than community cohesiveness produce aggressive entrepreneurs who are not shy to absorb risk and try out new ideas. Other cultural traits such as conceptions of truth, wisdom, behavior, humanity, leadership, and God also seem to have different effects on several aspects of entrepreneurship. However, researchers agree that there is a need for further testing and statistical analysis since results are not as comprehensive as other finer studies.
Conclusion
It seems that culture plays a significant role in influencing the individual to make certain entrepreneurial decisions. While research may not yet be conclusive on the topic due to the susceptibility of studies to cultural bias and stereotyping as is common in most cultural studies, the initial results are a pointer to the fact that the relationship between culture and entrepreneurship cannot be ignored. Research studies are also limited in the sense that they do not give information on other control variables that may affect the seemingly different entrepreneurial behaviors such as poor economic development, unavailability of credit facilities, education e.t.c.
Critically evaluate the contribution made by economists in understanding the concept of entrepreneur in a business context.
Classical economists like Parkin long recognized the role that entrepreneurship plays in the economic system of a country. These economists even added it as one of the four critical factors of production alongside labor, capital and land. While the other three are much dependent on resource availability, entrepreneurship stands out as a unique quality that warrants research. From the early 18th Century, the term entrepreneurship has been used on many acts that involve innovative ways of doing things. Originally, the term was used in the French military for certain generals who had unique strategies in war.
The economists contribution to entrepreneurship
While early economists were satisfied that the placing of entrepreneurship as a factor of production was enough to show its strong economic influence, modern economists seem to ignore such artificial restrictions. Instead, economists such as Joseph Schumpeter felt that entrepreneurship was more of a phenomenal factor that was in its own bracket. Schumpeter reasoned that while land, labour and capital were measurable and independent of intrinsic human capacity, entrepreneurship could not simply fit in among the other three due to the huge variance. Additionally, entrepreneurship seemed to defy the ordinary rules of economics and instead forge new paths that economists could not have foreseen.
The works of Joseph Schumpeter opened the floodgates for modern economists to discard the economic rule book and investigate the true role of entrepreneurship. The works of William Baumol are an excellent example of Schumpeters influence. First, he agrees with Schumpeter in stating that entrepreneurship should actually be factored in the price determination mechanisms that only include demand and supply. He reiterates that it is the innovation of new products that seems to move the market not mere supply and demand. He states that innovation actually threatens companies that are well established and which economists would term as financially sound with obsolescence and extinction if they fail to be innovative or entrepreneurial. Baumol averred that instead of relying on occasional flashes of inspiration organizations should set up research and development departments that would ensure that innovation remains continuous.
Baumol adds that innovation does not necessarily mean coming up with totally new ideas. It is mainly the improvement of the already existing products in a more presentable and creative manner. He insists on the simplicity of new ideas and encourages individuals to develop an appetite for risk. However, risk seems to be the more rampant cause of entrepreneurial failure with less than 10% of new ideas bringing instant success in most research studies. Nevertheless, entrepreneurs seem to be in a class of their own with Baumol stating that they possess a touch of madness .
Based on the works of these radical economists, entrepreneurship has now received more attention with the 21st century being the foreground for a purely entrepreneurial approach to all business activities. Judging from the level of competition in modern industries as well as the amounts of money that organizations both big and small have put into research activities, no one can deny that entrepreneurship is in the drivers seat of modern economics.
Conclusion
Schumpeter, Baumol and other economists have played a huge role in ensuring that entrepreneurship gets the attention it deserves. Nowadays, it is common for one to hear of entrepreneurship in education, leadership, religion, and many other spheres that traditionally had instructional models of administration and management. The contribution by economists therefore cannot be downplayed.
Access the relative strengths and weaknesses of large/small businesses and the role of innovation.
When it comes to entrepreneurship, there is a distinct difference in the approach of small organizations as compared to larger ones. The reason for this is that the dynamics for both organization types differ. While the small business may be run by one individual probably self employed or employing close family members, large organizations have to grapple with a huge workforce, complex decision making procedures and divergent flow of authority and responsibility.
Strengths of a small business
Generally, a small business enjoys the benefits of easy start-up and smoother decision making. Most small businesses are usually engaged in one particular activity that generates all the revenue. These small businesses have the upper hand over large firms when it comes to adjustment to the economic environment e.g. they can easily cease one business activity and quickly jump on board another money-minting venture. Due to the complex decision making procedures and statutory limitations, large firms do not enjoy the benefits of such rapid structural adjustments. Other strengths include the ability to cut costs easily, the ease of monitoring profits and revenue growth, easier investment decision making and lower taxes. A small firm is more convenient for an individual entrepreneur since he/she is allowed a bigger leeway to test new ideas and innovations.
Weaknesses of small businesses
While small businesses may be easily adjustable, they are more susceptible to collapse due to the latitude that the individual has to make investment mistakes. In large companies, investment decisions are made by boards under the advice of industry professionals. This means that the margin for investment error is lower than that in small firms that prefer a go-it-alone approach. Another weakness is the limitation in terms of financial and human capital. A small firm cannot enjoy the benefit of huge capital bases that come with benefits of economies of scale and larger profits. Additionally, the small firm does not enjoy sufficient human capital which is quite necessary when it comes to innovation since more people are more likely to come up with better ideas than an individual.
Strengths of large firms
Large firms enjoy huge intellectual, social and human capital as well as a bigger portfolio of assets and financial capital. This means that they have a larger capacity for innovation since they can hire the best brains in the market and also maintain an employee base that is skilled and innovative. Hypothetically, larger firms are therefore more advanced than smaller firms when it comes to innovation though in actual fact, smaller firms show a higher degree of innovation. These firms also have the advantage of weighted decision making whereby only the best decision reaches the implementation stage. This makes larger firms less susceptible to entrepreneurial failure.
Weaknesses of larger firms
Large firms face a myriad of weaknesses owing to the large number of employees and the complex decision making processes. They are thus less likely to be innovative than smaller firms despite their larger innovative capacity since entrepreneurial decisions have to be vetted by a group of people and are more likely to be watered down or rejected. This is because boards have been shown to be more risk-averse than individuals due to the fact that they have a greater responsibility to protect shareholders investments. Another weakness is the large number of employees who might not be at par when it comes to achieving organizational goals thus dragging the companys performance. Finally, large firms face entry barriers due to high start-up costs and huge taxes.
Role of innovation in small/large businesses
As discussed above, innovation plays a great role in determining the entrepreneurial capacity of a business enterprise. In large firms, the accessibility of quality human resources means that they can be more innovative than smaller firms. However, bureaucracy in decision making lowers this capacity and acts as a barrier to innovation. For smaller firms, they have less financial muscle and are thus disadvantaged in acquiring the best human capital but the touch of madness that is required in entrepreneurs is present meaning that they are more likely to embrace innovation.
Conclusion
Innovation is the ban of entrepreneurship without which there would be no economic dynamism and investment in new ideas. The emphasis on innovation is therefore reasonable since it pushes organizations to outdo themselves and come up with better products that would ensure their long term survival in competitively hostile industries. In summary, organizations whether small or large have only two choices-innovate or perish.
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