Class 3 Flashcards
Theory of entrepreneurship (14 cards)
how do entrepreneurs perceive success differently based on their goals and motivations?
4 theories
- INDIVIDUALIST CONCEPTION (self fulfillment theory) - emphasizes intrinsic motivation and personal fulfillment
- TRIBALIST CONCEPTION (customer connection theory) - success is creating an emotional connection with customers, rooted in relationship marketing theory
- EVOLUTIONIST CONCEPTION (market paradigm shift theory) - success is transforming market paradigms, industry standards or consumer behaviour
- REVOLUTIONIST CONCEPTION (societal transformation theory) - success is transforming societal paradigms, focusing on mission driven ventures addressing social challenges
why is it difficult to identify entrepreneurship?
because in the neoclassical framework of a market economy, there is no room for dynamic elements such as enterprises and entrepreneurs.
The actions, abilities, and decisions of the entrepreneur cannot always be analyzed using the quantitative methods typical of economics
Entrepreneural theories in order of relevance of the entreprenur in firm’s success and economic growth
- Adam Smith
- Baumol
- Casson + French School
- Schumpter + Austrian School
Why does “context matter” in entrepreneurship?
Innovations are a result of the dynamism present in specific contexts and historical periods (industrial revolution, silicon valley)
- Durkheim: collective effervescence - social interaction produces the diffusion of innovation
- Cipolla: entrepreneurs are not the sole actors, “human vitality” of entire society results in a creative spark
SPECTRUM: SMITH AND RICARDO
entrepreneur has no role
for classical economists the entrepreneur only provides capital, focus is on market equilibium, and economic growth progresses on its own
the entrepreneur is not required to “generate innovation”, as the economic system is characterized by routine, regularity, and adaptation
SPECTRUM: MARSHALL
the four factors of production are:
-labor
-capital
-resources
-ORGANIZATION!
the entrepreneur has a set of abilities that can only be acquired through experience, not formal education
Marshall places much more emphasis on routine activities rather than innovation. For this reason, in addition to the entrepreneur, managers also matter. The entrepreneur is the “first among equals”
SPECTRUM: SCHUMPTER and THE AUSTRIAN SCHOOL - Culture & Creativity
The entrepreneur is a superhuman, a creative
Schumpter places greater emphasis on change and the factors that trigger it. Capitalism is a process of change, and change is the result of “economic destruction” , in which the entrepreneur plays a central role. Entrepreneurial action pushes the economy out of its static trajectory.
Schumpterian Innovation characeristics (6) and the definition of creative destruction
Innovations characteristics:
1. cyclical nature
2. developed endogenously within the economic system
3. respond to specific needs
4. give rise to new combinations of production factors
5. lead to changes at both social and cultural levels
6. determine the “business cycle”
Creative destruction is the outcome of an innovative process, typically driven by the entrepreneur
Characteristics of European businesses during the first industrial revolution (6)
- central role of the entrepreneur as an individual
- innovation introduced by new, small enterprises
- low entry barriers
- high rate of new business formation
- old enterprises replaced by new ones
- destruction of rent positions (creative destruction)
How do entrepreneurs trigger economic growth? Creative vs Adaptive Response
Creative response:
- doing new things or doing things in a new way (introducing new methods, products, or organizational forms)
- innovation transforms the economic landscape
- unpredictable and original, makes sense when analyzied retrospectively
- essential for long term economic development and driven by entrepreneurial vision/determination
Adaptive response: replicating an old production method
From creative response to destruction: outcome characteristics
- Outcome cannot be predicted, it is understood ex-post
- “path dependency”: outcome has a great impact as it shapes the course of subsequent events
- Outcome depends on entrepreneurs, as well as QUALITY and QUANTITY of human resources involved
Innovation can be one of five activities, which ones?
- introduction of a new product
- introduction of a new method of production
- new combinations: new market
- new combinations: new source of raw materials
- carrying out of a new organization in any industry (monopoly)
where does innovation capital come from? (3)
- human capital: individual skills and abilities
- social capital: support and resources for innovative endeavors
- reputation capital: credibility established, which makes it easier to secure backing for new ideas
Schumpter Mark I and Mark II
Mark I:
“early stage”
uncertain technology, low entry barriers, startups drive innovation
Mark II:
“maturity”
mature technologies, economies of scale, monopoly driven profits and oligopolistic market positions, R&D investments, high barriers to entry, creative accumulation
!accumulation prevails over destruction
