COURSE: GST 223 INTRODUCTION TO ENTREPRENEUR

COURSE LECTURER: MR. ANAS MUHD ABUBAKAR

DEPARTMENT: DEPT. OF ECONOMICS
CONTACT: +234 803 159 4066

INTRODUCTION

The word "Entrepreneur" is derived from the French verb 'entrepredre'. It means
'to undertake'. In the early 16th century the Frenchmen who organized and led
military expeditions were referred to as 'Entrepreneurs'. In the early 18th
century French economist Richard Cantillon used the term entrepreneur to
business. Since that time the word entrepreneur means one who takes the risk of
starting a new organization or introducing a new idea, product or service to
society..

Entrepreneur

Scarborough (2014) defines entrepreneur as one who creates a new business in

the face of risk and uncertainty for the purpose of achieving profit and growth by
identifying significant opportunities and assembling the necessary resources to
capitalize on them. Drucker (1986) defines the entrepreneur as someone who
always searches for change, respond to it, and exploits it as an opportunity.
Kuratko (2014), defines 10 entrepreneurs are individuals who recognise
opportunities where others see chaos, contradiction, and confusion. They are
aggressive catalysts for change within the marketplace.

An entrepreneur can be regarded as a person who has the initiative skill and
motivation to set up a business or enterprise of his own and who always looks for
high achievements. He is the catalyst for social change and works for the common
good. They look for opportunities, identify them and seize them mainly for
economic gains. An action oriented entrepreneur is a highly calculative individual
who is always willing to undertake risks in order to achieve their goals.

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Reiss (2010), views the entrepreneur as the person that recognizes and pursues
opportunities without regard to the resources he/she is currently controlling,
with confidence that he/she can succeed, with the flexibility to change course as
necessary, and with the will to rebound from setbacks.

Entrepreneurship

The process of performing the roles of an entrepreneur is called

entrepreneurship. Thus, we may define entrepreneurship as Barringer and
Ireland (2012) opine as the process by which individuals pursue opportunities
without regard to resources they currently control. Wilson (2004) defines
entrepreneurship as the art of turning an idea into a business. Kuratko (2008),
defines entrepreneurship as a dynamic process of vision, change, and creation. It
requires an application of energy and passion toward the creation and
implementation of new ideas and creative solutions. Essential ingredients
include the willingness to take calculated risks in terms of time, equity or career,
the ability to formulate an effective venture team; the creative skill to marshal
needed resources; the fundamental skill of building a solid business plan; and
finally, the vision to recognize opportunity where others see chaos, contradiction,
and confusion.

Enterprise

An enterprise is an activity or a project that produces services or products; be it

run to make a profit for a private individual or group of individuals (i.e small
business) or either a function to provide services to individuals and groups in the
community. Enterprise can be defined as initiative, or purposeful broad plans
requiring many coordinates; or in business or financial applications as the overall
operating entity

Traits of Entrepreneur

 Risk Tolerance
 Motivation
 Mental ability and Creativity
 Clear Objectives
 Good Communication Skills

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  Human Skills
 Technical skills
 Self Confidence and Multi-Skilled
 Confidence in the Face of Difficulties and Discouraging Circumstances
 Innovative skills
 Results-Orientated
 Risk-Taker
 Total Commitment
 Calm
 Focused
 Tolerance
 Balance
Motivation: Entrepreneurs are usually passionate, buoyant and highly self-
motivated. They have very high energy levels and are always willing to take
initiatives. They are usually concerned about their business and how to increase
the market share, how to improve their existing processes.

Risk Tolerance: The establishment of any entrepreneurial venture is risky and

the entrepreneur has to assume risk. As risk and rewards are inseparable, in
order to grow, the entrepreneur should have large appetite for assuming risk.
Entrepreneurship is a very risky venture; entrepreneurial decisions can have far-
reaching impact on the organization, people in the organization and even the
economy. These decisions are critical, enormous and cannot be easily reverted.
Vision The entrepreneur is a visionary. One of the major responsibilities of an
entrepreneur decides the direction the business should go. It requires a strong
vision on the part of an entrepreneur to ensure his/her business reach maturity.

Mental ability and Creativity: The entrepreneur should anticipate changes and
must be able to study the various situations under which decisions have to be
made. Successful entrepreneurs have the creative ability to recognize and pursue
opportunities. They are always on a look out for new ways of doing things such
as launching new products, rebranding existing products, providing new services
etc.

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Clear Objectives: An entrepreneur has clarity about the objectives to be
achieved in the business, the nature of goods to be produced and subsidiary
activities to be undertaken. This clarity in objectives helps them to translate their
business idea into reality and gives the business a sense of direction.

Good Communication Skills: This basically pertains to communicate effectively.

An entrepreneur who can effectively communicate with customers, employees,
suppliers and creditors will be more likely to succeed than the entrepreneur who
does not. An entrepreneur must have a good feedback system.

Human Skills: An entrepreneur must have good human relations. The most
important personality factors contributing to the success of any entrepreneur
include emotional stability, good inter- personal relations, consideration and
tactfulness. An entrepreneur has to maintain good relations with his customers
so as to encourage them to continue to patronize his business. He must also
maintain good relations with his employees so as to motivate them to perform
their jobs with a high level of efficiency.

Technical skills: An entrepreneur must have the competence and proficiency in

the knowledge of the business. It is the possession of specialized knowledge and
understanding in methods, processes, procedures and techniques in carrying out
day-to-day activities. Examples are; coaching, organizing, monitoring
environment amongst others.

Self Confidence and Multi-Skilled: The entrepreneur must have self-confidence

and believe in him/herself. Self-confidence is an important characteristic that
enables individuals to handle any situation without having inferiority or any
other type of complex. The entrepreneur also has to be a jack of all trade and
master of all. He/she must possess different skills unlike other individuals. For
instance, assuming an entrepreneur is a marketer, the entrepreneur should not
only possess marketing skills and interpersonal skills but also language skills i.e.
ability to speak more than one language. This definitely will be an added
advantage.

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Confidence in the Face of Difficulties and Discouraging Circumstances: The
entrepreneur must be steadfast and resolute and be ready to move on even in the
face of adversity. He/she should be a ‘never say never’ kind of person; everything
is possible for the entrepreneur.

Innovative skills: The entrepreneur may not necessarily be an 'inventor' but the
one that can make a difference; he/she should be able to see what others cannot
see and be able to carve out a new niche in the market place.

Results-Orientated: The entrepreneur is one who knows how to get results

under any circumstances either with others or through others. The entrepreneur
does this by setting goals and ensuring that such goals are doggedly pursued by
all concerned willingly and with joy.

Risk-Taker: The business environment is dynamic and filled with uncertainties

and risk. In order to succeed the entrepreneur has to take risk. Successful
entrepreneurs take calculated risks and in some cases shift the risks to others.

Total Commitment: Starting /creating a new business is a serious exercise that

requires a lot of commitment and hard work. It is like bringing a child into the
world and nurturing the child to adulthood. This requires commitment,
dedication, hard work, energy and singlemindedness otherwise the ‘child’ (i.e.
business) may die prematurely (Di-Masi, 2010).

Calm: Entrepreneurs need to be cool, calm and collected. They have to remain
calm even when exposed to stress, emergency or crisis situations.

Focused: In getting things done and starting and maintaining a business

attention has to be paid to a lot of details. Small things when not handled properly
or noticed on time may lead to disastrous outcomes.

Tolerance: The entrepreneur has to relate with people. People vary in terms of
their perceptions, personality, motivations and attitudes amongst other things.
The entrepreneur needs to be tolerant while not being weak, in order to get
things done

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Balance: Though, the entrepreneur is a human being, he/she has to be like a
super human being in order for him to succeed. To this effect, he/she has to be
able to balance all.

FORMS OF ENTREPRENEURS

 Intrapreneurs
 Technopreneur
Intrapreneurs

An Intrapreneur work within an existing organization to pursue the exploitation

of business opportunities There are given situations where an entrepreneur is
not able to establish his or her own business and as such has to work in an
organization. In this case they are referred to as ‘Intrepreneurs’ i.e. entrepreneurs
within an organization. These individuals are entrepreneurs in their own right
because they pursue the exploitation of business opportunities as they emerge
and are also visionaries within a given organization. Thus, once identified, these
individuals should be encouraged to manifest their entrepreneurial abilities to
the benefit of the organization otherwise they will be frustrated and may leave
the organization or start their own businesses.

Technopreneur

We could also have technopreneur, who is an individual whose business is in the

realm of high technology, who at the same time has the spirit of an entrepreneur.
A technopreneur business involves high technology or to put it more clearly a
technopreneur is a technological innovator and a business man all combined in
one individual (Ogundele, 2007).

TYPES OF ENTREPRENEUR

Rockstar (2008) identifies the four types of entrepreneurs as

 Innovative
 Imitating
 Fabian
 Drone.
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Innovative: This type of entrepreneur is preoccupied with introducing
something new into the market, organization or nation. They are interested in
innovations and invest substantially in research and development.

Imitating: These are also referred to as ‘copy cats’. They observe an existing
system and replicate it in a better manner. They could improve on an existing
product, production process, technology and through their vision create
something similar but better. This is the case of the student becoming better than
the master!

Fabian: These are entrepreneurs that are very careful and cautious in adopting
any changes. Apart from this, they are lazy and shy away from innovations.

Drone: These are entrepreneurs that are resistant to change. They are
considered as ‘old school’. They prefer to stick to their traditional or orthodox
methods of production and systems.

Entrepreneurs Role
Entrepreneurs occupy three roles, namely as agent of
o Economic change
o Social change and
o Technological change.
These are referred to as behavioral roles. The types and roles of entrepreneur
notwithstanding, all entrepreneurs possess certain characteristics and are
motivated to become entrepreneur due to certain factors or circumstances which
we shall discuss in this unit.

Social Roles of Entrepreneur

 Transformation of traditional indigenous industry into a modern

enterprise.
 Stimulation of indigenous entrepreneurship.
 Job or employment creation in the community.
 Provision of social welfare service of redistributing wealth and
income.

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Economic Roles of Entrepreneur

 Bearing the ultimate risk of uncertainty.

 Mobilizing savings necessary for the enterprise.
 Providing channel for the disposal of economic activities.
 Utilizing local raw materials and human resources.

Technological Roles of Entrepreneur

 Stimulation of indigenous technology in the production process.

 Adapting traditional technology to modern system.
 Adapting imported technology to local environment.
 Developing technological competence in self and the workforce
through innovation (Ogundele, 2007).

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HISTORICAL BACKGROUND OF ENTREPRENEURSHIP NIGERIAN

Early stage
The origin of entrepreneurship started with traders and merchants. The first
known instance of humans trading comes from New Guinea around 1700 B.C. by
which locals exchanged a black volcanic glass used to make hunting arrowheads
for other goods.
According to Ani (1999) Entrepreneurship started when people produce more
products than they needed, as such they had to exchange those surpluses. For
instance, if a blacksmith produced more than what he needed, he had to
exchanged the surplus with what he had not, may be some yams or goat etc. by
this way, producers came to realise that they can concentrate in their production
to produce more and then exchange with what they needed.
Through this exchange of produce, entrepreneurship started. An entrepreneur is
someone who is independent, sees an opportunity, utilizes it and bear the risk of
uncertainty with the mind set to succeed. Nigerians in the ancient days were
engaged in entrepreneurship. The early entrepreneurship is characterized with
production or manufacturing, in most cases often started with a small capital
which most of it comes from their personal savings.

In other words, we can say the early entrepreneurship started with trade by
barter before the advent of any form of money. And again, the history of
entrepreneurial can be looked at in different ways. The economic history in one
way, we can relate the historical evolution of entrepreneurship starting from
expansion through innovation and inventions. How it all began and its impacts
on society. This era lunched us into a system where entrepreneurs are alert
enough to perceive opportunity and exploit any new innovations. Many
inventions, subsequent commercialization and acceptance by society have
dramatically changed our way of life over the years. Like automobile and
combustion engine, touch light (use of batter) and touch light (use of electricity),
microchips, computers and mobile phones, all in different ways changed society.

The modern stage

Modern entrepreneurship in Nigeria started with the coming of the colonial

masters, who brought in their wears and made Nigerians their middle men. In
this way, modern entrepreneurship was conceived. Most of the modern
entrepreneurs were engaged in retail trade or sole proprietorship. One of the
major factors that have in many ways discouraged this flow of entrepreneurship
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development in Nigeria is the value system brought about by formal education.
For many decades, formal education has been the preserve of the privilege. With
formal education people had the opportunity of being employed in the civil
service, because in those days the economy was large enough to absorb into the
prestigious occupation all Nigerians their goods. As such, the system made
Nigerians to be dependent on the colonial masters.

Again the contrast between Nigerian and foreign entrepreneurs during

the colonial era was very detrimental and the competitive business strategy of
the foreign entrepreneurs was ruinous and against moral standards established
by society. They did not adhere to the theory of “live and let’s live”. For instance,
the United African Company (UAC) that was responsible for a substantial
percentage of the import and export trade of Nigeria, had the policy of dealing
directly with producers and refused to make use of the services of Nigerian
entrepreneurs. The refusal of the expatriates to utilize the services of local
businessmen inhibited their expansion and acquisition of necessary skills and
attitude. Because of this, many eventually folded up. Those that folded up built up
resentment against business which became very demoralizing to other
prospective entrepreneurs. As a result, the flow of entrepreneurship in the
country was slowed down. But, with more people being educated and the fact that
government could no longer employ most school leavers, economic programs
to encourage individuals to go into private business and be self-reliant were
initiated.

Such economic policy programs that are geared towards self-reliance

for individuals are programs as Open Apprenticeship Scheme, Graduate
Employment Programs etc. and other policies that encourage or make it easy for
entrepreneurs to acquire the needed funds e.g.; Peoples Bank of Nigeria, Funds
for Small-Scale Industries(FUSSI), co-operative societies etc. were established to
assist entrepreneurs in Nigeria

These changes resulted to the entrepreneur taking this new innovation as an

opportunity to break new grounds. The invention of air travel led to air freight,
travel agencies, terminal (air) services, inter-state, inter-region and international
business.

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Market and machines: the start of industrial revolution led to the development of
innovatory technology and standard of living we have today. The concept of mass
production and economics of scarce came into existence. For example, telegram
and telephone connected humanity around the world, with electricity; we lit up
the night, digital watches, computer and mobile phones led to the opportunity in
software development.

The progression of our social existence was as a result of the invention of new
technologies and ways of doing things. We can say that, innovation is a period
and regional. That is, the environment which an entrepreneur exploits
opportunities is rather greater than people with brilliance in isolation. Therefore,
the time and space of an entrepreneur is important. The concept of
entrepreneurship have been refined from being a personal perspective to a kind
of behaviour of an entrepreneur in his/her ability to initiate ideas, perceive
opportunity, turning the available resources to exploit the opportunity profitably
and the acceptance of bearing the risk in times of uncertainty. In the Nigerian
economy, one great entrepreneur of the person of Alhaji Dangote can be compare
or referred to as an entrepreneur that have revolution the Nigeria economy
system. Starting from a small business and became large in business enterprise.
Breaking new grounds, taking the risk and exploring the opportunities available
to him. He is not only a wealth creator but also an employer of labour in the
country as whole.

In conclusion, taking a look at the historical, evolution and background of

entrepreneurship from its early stage, the modern era, market mechanism etc the
entrepreneurship have played important role in the economic development of
Nigeria’s economy. The ability to create job, provide competition cannot be
overemphasized.

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THEORIES OF ENTREPRENEURSHIP

INTRODUCTION

The functionality of an entrepreneur is based on some established theories.

These theories cover the economic, social and psychological behavior of an
entrepreneur. Earliest Period During this period, Marco polo who was anItalian
acted as a go-between. He made attempts to trade routes to the Far East. As a
go-between, he had to sign a contract with a money person to sellhis goods
while as a merchant; he took active role in trading by bearing all the physical
and emotional risks involved in the venture.

Economic Theory of Entrepreneurship

This theory assumes that the entrepreneur is the one responsible for pulling
resources, labour, materials and other assets together in order to make their
value greater than before, and also introduce changes, innovations, creativity
and a new order. The economic theory of entrepreneurship considers the
relationship between economic conditions and incentives to arrive at a risk-
reward equation that informs a determination on whether or not to pursue a
potential venture.

Economic theories of entrepreneurship is therefore tend to understand

business ventures in terms of an innovator purchasing several factors of a
product at a bulk rate, combining them for resale at a higher rate but in the face
of unknown market conditions

Features of Economic Theory of Entrepreneurship

 Entrepreneurship and economic growth take place when the economic

conditions are favorable.
 Economic incentives are the main motivations for entrepreneurial
activities.
 Economic incentives include taxation policy, industrial policy, sources of
finance and raw material, infrastructure availability, investment and
marketing opportunities, access to information about market conditions,
technology etc.

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The economic theory of entrepreneurship is sub-divided into three namely;

 Classical theory,
 Neo-classical and
 Austrian Market Process

Classical Theory

The classical theory inscribed the virtues of free trade, specialization which
was a result of Britain‘s industrial revolution which took place in the mid- 1700
and lasted until the 1830s. The classical movement described the role of the
entrepreneur in the context of production and distribution of goods in a
competitive marketplace (Say, 1803). Classical theorists articulated three
modes of production: land; capital; and labour.

There have been various objections to the classical theory. These theorists failed
to explain the dynamic upheaval generated by entrepreneurs of theindustrial
age (Murphy, Liao & Welsch, 2006).

Neo-classical Theory

The neo-classical model emerged from the criticisms of the classical model
and indicated that economic phenomena could be relegated to instances of
pure exchange, reflect an optimal ratio, and transpire in an economic system
that was basically closed. The economic system consisted of exchange
participants, exchange occurrences, and the impact of results of the exchange on
other market actors. The importance of exchange coupled with diminishing
marginal utility created enough impetus for entrepreneurship in the
neoclassical movement (Murphy, Liao &Welsch, 2006).

Criticisms of Neo-classical

 Aggregate demand ignores the uniqueness of individual-level

entrepreneurial activity.
 Neither use nor exchange value reflects the future value of innovation
outcomes.

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  Rational resource allocation does not capture the complexity of market-
based systems.
 Efficiency based performance does not subsume innovation and non-
uniform outputs; known means/ends and perfect or semi-perfect
knowledge does not describe uncertainty.
 It is impossible to trace all inputs and outputs in a market system. Finally,
entrepreneurial activity is destructive to the order of an economic
system.

Austrian Market Process (AMP)

These unanswered questions of the neo-classical movement led to a new

movement which became known as the Austrian Market process (AMP). The
AMP, a model influenced by Joseph Aloi Schumpeter (1934) concentrated on
human action in the context of an economy of knowledge. Schumpeter
(1934) described entrepreneurship as a driver of market-based systems. In
other words, an important function of an enterprise was to create something
new which resulted in processes that served as impulses for the motion of
market economy.

Psychological theories of Entrepreneurship

Psychological theory of entrepreneurship identifies traits, motives and

personalities as the major factors that infuse the entrepreneurial spirit in an
individual. The theory emphasizes personal characteristics that define
entrepreneurship. Personality traits, need for achievement and locus of control
are found to be associated with entrepreneurial inclination. The psychological
theory which focuses on personality factors, believes that entrepreneurs have
unique values and attitude towards work and life. Psychological attributes
differentiate entrepreneurs from non-entrepreneurs, and successful
entrepreneurs from unsuccessful ones.

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The psychological theories are:

i. Personality trait
ii. Need for achievement
iii. Locus of control
iv. Psychodynamic model
v. Risk taking propensity.

Personality Trait; According to the personality trait theory (2004), Personality

trait is defined as stable qualities that a person shows in most situations.
Personality traits are the enduring inborn qualities or potentials of the
individual that naturally make him/her an entrepreneur. Some of the traits
which entrepreneur exhibits include vision, enthusiastic, optimistic, flexible,
open mindedness, and versatility amongst others.

Need for achievement; The need for achievement theory was propounded by
McClelland (1961). The theory explained that human beings have a need to
succeed, accomplish, excel or achieve. Entrepreneursare usually driven by this
need to achieve and excel. This theory states that people desire to achieve
something for their inner feeling of accomplishment.

Criticisms

This theory has been criticized as a result of the following:

 The theory is contradictory and has limited evidence

 It has no direction for causality
 The theory is more applicable to the western culture where personal
achievement is more appreciated as compared to other culture
 It is limited only to business people while other people also show
that behavior.

Locus of control; Locus of control was first introduced by Julian Rotter in the
1950s. Rotter (1966) refers to Locus of Control as an individual‘s perception
about the underlying main causes of events in his/her life. Locus of control
orientation is a belief about whether the outcomes of our actions are
contingent on what we do (internal control orientation) or on events outside
our personal control (external control orientation).
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Entrepreneur‘s success comes from his/her own abilities and also support from
outside. This theory states that there is a degree to which one believes that
he/she is in control of one‘s destiny. This caneither be internal or external locus
of control.

Internal Locus of control: Individuals with an internal locus of control believe

that they are able to control life events

External locus of control: Individual with an external locus of control believe

that life's events are the result of external factors, such as chance, luck or fate.

Observation/Criticism

• This theory correlates to the need for achievement theory (n-ach).

Individuals with internal locus of control people are the ones who are
interested in need for achievement than the externals.

• Directions of causality i.e. people tend to work harder when getting

success thus have internal locus of control.

• Culture and belief system; i.e. there are societies which their belief system
make them more externals (for example, those who believe that God
willdo everything for them).

• Being internal is not always the best (An individual cannot always be
incharge of everything such as weather and other peoples ‘behaviour).
• Locus of control (LOC) has negative influence on entrepreneurial
inclination.

Psycho-dynamic Model; This model was propounded by Kets de Vries. The

model is concerned with how people tend to be self-employed and become
successful because of their ―troubled childhood. In troubled childhood, children
tend to be abused, with low self-esteem, and lack of confidence. Therefore, an
individual growing in such an environment does have reserved wishes towards
those in control.

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Observations/Criticism

i. People tend to say that ―they take the profit and pass the risk to
someone else.
ii. People who take risks normally take a ―calculated risk and do notgamble.
iii. People who are success in business are moderate risk takers.
iv. Risk is not only a financial loss, but also image loss or loss ofrelationship
with other people in the society.

Sociological Theory of Entrepreneurship

The sociological theory is the third of the major entrepreneurship theories.

Sociological enterprise focuses on the social context. Reynolds (1991) has
identified four social contexts that relates to entrepreneurial opportunity.

i. The social networks: The social network focuses on building social

relationships and bonds that promote trust and not opportunism. In other
words, the entrepreneur should not take undue advantage of people in order
to be successful.
ii. The life course stage: This involves analyzing the life situations and
characteristic of individuals who has decided to become an entrepreneur.
The experiences of people influences their thought and action which
motivates them to do something meaningful with their lives.
iii. The ethnic identification. One‘s sociological background is one of the decisive
―push factors to become an entrepreneur.
iv. The population ecology. Environmental factors play a vital role in the survival
of businesses. The political system, government legislation, customers,
employees and competition are some of the environmental factors that have
an effect on the survival of new venture or the success of the entrepreneur.

The sociological theory of entrepreneurship embraces social culture as a driving

force of entrepreneurship. The entrepreneur becomes a role player in
agreement with the role expectations of the society, and such role expectations
are based on religious beliefs, taboos, and customs. Sociological models that
have received significant empirical support are the intergeneration inheritance
of enterprise culture, social marginality and ethnicity.

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Assumptions of the Sociological theory of entrepreneurship

 Entrepreneurship is likely to get a boost in a particular social culture

 Society‘s values, religious beliefs, customs, taboos influences the behaviour
of individuals in a society
 The entrepreneur is a role performer according to the role expectationsby
the society

Social marginality model; This theory suggests that individuals whorecognize

a strong level of incongruence between their personal attributes and the role
they hold in society will be motivated to change or reconstruct their social
reality. Some individuals may reconstruct their reality by changing careers,
employers, or result to self-employment. Marginal men are referred as
individuals who are less included or integrated in their society.

Marginal men are usually not completely part of the society of their adoption as
such; they are free of the restrictions imposed by the value system governing
the society. At the same time, having left their own society, they are no longer
constrained by its dominant values. This situation brings about the
development of unconventional patterns of behaviour, which increases their
propensity to become entrepreneurs.

Criticism

i. Marginality is not an adequate explanation for the over-representation of

certain people in entrepreneurship carriers e.g. Hispanics and Africans are
underrepresented in entrepreneurship despite them beingmarginal.
ii. Aggressiveness and co-operation is an attribute in which marginal people
tend to have.

Ethnicity; An ethnic origin of a person is said to influence the choice between

paid employment and self-employment as well as performance in self-
employment. Evidence of over-representation of certain ethnic groups in
business carriers abounds throughout the world. The ethnic groups often
quoted in the literature as being overrepresented in entrepreneurship include
Ibos in Nigeria, Kikuyus in Kenya and Chagga in Tanzania. All of these are spread
in different parts of their countries in which they over-represented in

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entrepreneurial careers. To this extent, they are less integrated in the societies
in which they work and therefore less likely to be constrained by dominant
values shared either by their own ethnic group or by their hosts.

Criticism
It has been found that, even members of these groups (Ibo, Kikuyu and Chagga)
who have remained in their homelands are quite active in entrepreneurship.
Therefore their cultures must have influenced their entrepreneurial behaviour
rather than ethnicity.

Inter-Generational Inheritance of Enterprise Culture

This theory asserts that entrepreneurial practice is largely inherited.
Consequently, offspring‘s of entrepreneurial parents are more likely to become
entrepreneurs and more successful as compared to others. A strong grounding
in business and ownership ethic at an early age is a very vital tool and powerful
driving force for children as they choose their future careers. An individual who
grows up around a family that runs and own a business is likely to benefit from
the skills, accumulated experiences and networks of existing firm. Such an
individual will have better access to advice, credit, established markets and
sources of inputs.

Criticisms

Several studies supports this theory, however studies on female

entrepreneurship found that most of them were first generation entrepreneurs
and none of their parents have been running their own business. Other studies
also found that there is no significant difference between entrepreneurs and
managers in terms of having self-employedparents. However this is the most
supported sociological model.

Critique of Sociological Studies of Entrepreneur

Sociologists’ approach is seen to be mono-casual and fails to generalize the

theory to explain the reasons all those who belong to their chosen classes

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 BUSINESS ENVIRONMENT

Introduction
The success of a business is not only dependent on the entrepreneurial characteristics
and internal factors which may have to do with working environment. External factor
such as government policies, instability in economy could have advert effect on a
business.
Environment
The concept ‘environment’ literally means the surroundings, internal, intermediate
and external objects, influences or circumstances under which someone or
something exists (Kazmi, 1999). The environment within which something exists
exhibits certain characteristics which have been identified by Kazmi (1999) to be:
complexity, dynamism, multifaceted and far-reaching impact. These are apart from
the simple and stable environmental conditions.

Business Environment
The business environment is simply means the surroundings within which a business
exists. It can also be defined sum or collection of all internal and external factors such
as employees, customers’ needs and expectations, supply and demand, management,
clients, suppliers, owners, activities by government, innovation in technology, social
trends, market trends, economic changes, etc. These factors affect the function of the
company and how a company works directly or indirectly. Sum of these factors
influences the companies or business organisations environment and situation.
Characteristics for Business Environment
 Stable Condition: This environment is highly predictable, thus permitting a
great deal of standardization (work process, skills and output) to take place
within the organization.
 Simple Condition: This environment is one where knowledge can be broken
down into easily comprehended components (Minzberg, 1979).
 Dynamism: The business environment is not static. It is dynamic and as such
changes continuously. This is because of the interactions of the various factors
that make up the business environment.
 Complexity: The business environment is not simple; it is complex by virtue
of the various components that comprise it and the interactions and
interrelationships among these factors.
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  Multifaceted: The business environment is many-sided. It can be viewed from
many angles by the parties involved. Hence, an occurrence that is viewed as
strength to an organization may be perceived as a weakness by another.
 Far-reaching impact: The happenings in the business environment can have
enormous impact on the organization. It could have the ripple effect. This is
because the business environment can be conceived as a system, specifically
an open system made up of different components that interact and interrelate
with one another. Hence, once there is a problem or development with one
aspect/sector, it could have far-reaching impact on the other aspects/sectors
(Kazmi, 1999).
Why is business environment important to an entrepreneur?
 It is important because it determines the success or otherwise of their
venture.
 It is within the environment discover opportunities.
 Threats to the business success are equally found within the environment.
 It is absolutely necessary for entrepreneurs to understand the environment.

The business environment is made up of the internal and the external environment
and the main macro environmental forces/factors found in the external environment
and micro environmental forces/factors in the internal environment of the business.

Internal Environmental Factors

The internal environmental factors refer to those factors over which the entrepreneur
has control, at least in the short run; this is why it is also called the controllable
environment of the business. The internal environment of the business is made up
of all those physical and socials factors within the boundaries of the business, which
impart strengths or cause weaknesses of a strategic nature and are taken directly into
consideration in the decision-making behavior of the business.

Strengths are inherent capacities, which a business can use to gain strategic
advantage over its competitors; they are the internal strong points of the business such
as: its core skills, competencies and expertise. While weaknesses are inherent
limitations or constraints, which create strategic disadvantages, they are the internal
factors that are lacking in the business. A successful entrepreneur will find ways of
overcoming the weaknesses and convert them into strengths (Ifechukwu, 1986;
Kazmi, 1999; Business- Plan, 2010).

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The internal environment of the business is made up of micro environmental factors
such as:

 Organizational goals and objectives,

 Specific technologies utilized by component units of the organization
 The size, types and quality of personnel,
 Its administrative units, and
 The nature of the organization’s product/service (Ifechukwu, 1986).

The nature of a business’ internal environment is also determined by the:

 Organizational resources; Organizational resources as the physical and
human resources used as inputs in the organization to create outputs
 Organizational behavior; Organizational behavior is the manifestation of the
various forces and influences operating in the internal environment of an
organization.
 Strengths; Strengths are inherent capabilities that give strategic advantage.
 Weaknesses,
 Synergistic relationships and
 Distinctive competence: The specific ability possessed by a particular
organization that distinguishes it from others.
 Organizational capability: This is the inherent capacity or ability of an
organization to use its strengths, and overcome its weaknesses in order to
exploit opportunities and face threats in its external environment.

External Environmental Factors

The external environmental factors refer to those factors over which the entrepreneur
has no control but have tremendous impact on the survival of the business; this is why
it is also called the uncontrollable environment of the business.
Within the external environment of the business are all the factors which provide
opportunities or pose threats to it. Opportunities are favorable conditions in the
business’ environment, which enable it to consolidate and strengthen its position.
They are the likely benefits to the business resulting from changes in the external
environment while threats are unfavorable conditions in the business’ environment,
which create a risk for, or cause damage to, the business; they are the possible pitfalls
or dangers resulting from changes in the external environment.

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A successful entrepreneur will grab opportunities as they emerge and avoid threats
or even look for ways of converting threats into opportunities (Kazmi, 1999;
Business- Plan, 2010).
Major Environmental Factors

Demographic factors: These include the market i.e. consumer populations. It deals
with their composition in terms of sex, age, income, marital status, educational
levels etc.
Political/Legal Factors: This is made up of laws, government agencies and
pressure groups that affect the business. Technological Factors: This deals with
knowledge of how to accomplish tasks and goals, and innovations (Herbert, 1973).
Natural Environment: This deals with all the gifts of nature or natural resources
of the nation that serve as input for the business. Socio-Cultural Factors: These deal
with the people, their norms, values and beliefs as they affect the business.
Economic Factors: These deal with the Macro level factors relating to means of
production and wealth distribution. It also includes the forces of supply and demand,
buying power, willingness to spend, consumer expenditure levels, and the intensity
of competitive behavior.
Competitive Environment: These are those firms that market products that are
similar to, or can be substituted for, a business’ product(s) in the same geographical
area.

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 Creativity

The terms creativity and innovation are often used to mean the same thing, but
each has a unique connotation. Creativity is ‘’ the ability to bring something new into
existence. “This emphasizes the “ability,” not the “activity,” of bringing something
new into existence. A person may therefore conceive of something new and envision
how it will be useful, but not necessarily take the necessary action to make it a reality.

Innovation is the process of doing new things. It is the conversion of creative

ideas into market place reality, which people are prepared to buy. This distinction
is significant. Ideas have little value until they are converted into new products,
services, or processes.

Innovation, therefore, is the transformation of creative ideas into useful

applications but creativity is prerequisite to innovation (Holt, 1992).

STAGES OF CREATIVITY
According to Holt (1992), the creative process comprises the following five stages
1. Idea germination: Exactly how an idea is germinated is a mystery (secret); it is
not something that can be examined under the microscope. For most entrepreneurs,
ideas begin with interest in a subject or curiosity (investigate) about finding a
solution to a particular problem.

2. Preparation: Once a seed of curiosity has taken form as a focused idea, creative
people embark on a conscious search for answers. If it is a problem they are trying
to solve, then they begin an intellectual journey, seeking information about the
problem and how others have tried to resolve it. Inventors will set up laboratory
experiments, designers will begin engineering new product ideas, and marketers will
study consumer buying behavior.

3. Incubation: The idea, once seeded and given substance through preparation, is
put on a back burner (sent it for consideration), the subconscious mind is allowed
time to assimilate information. Incubation is a stage of ‘mulling (think) it over’.
When an individual has consciously worked to resolve a problem without success,
allowing it to incubate in the subconscious will often lead to a resolution.

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4. Illumination: Illumination occurs when the idea surfaces as a realistic creation.
This stage is critical for entrepreneurs because ideas, by themselves, have little
meaning. Reaching the illumination stage separates daydreamers and tinkerers
from creative people who find a way to transmute values.

5. Verification: An idea once illuminated in the mind of an individual still has

little meaning until verified as realistic and useful. Thus, verification is the
development stage of refining knowledge into application.

FACTORS THAT ENCOURAGE CREATIVITY

• Knowledge of noble idea generation; The T-shape mind with a breadth of

understanding across multiple disciplines and one or two areas of in-depth
expertise.
• Thinking: a strong ability to generate novel ideas by combining previously
disparate elements. This ‘synergistic’ thinking must be combined with analytical
and practical thinking.

• Personal motivation; the appropriate levels of intrinsic motivation and passion

for one’s work combined with appropriate synergistic motivators and self-
confidence.

• Environment; a non-threatening, non-controlling climate conducive to idea

combination and recombination such as ‘intersection’

• Determination to be unique. Adams (2005)

Innovation

Innovation is the process of translating an idea or invention into a good or service

that creates value or for which customers will pay.
To be called an innovation, an idea must be replicable at an economical cost and
must satisfy a specific need.

Innovation involves deliberate application of information, imagination and

initiative in deriving greater or different values from resources, and includes all
processes by which new ideas are generated and converted into useful products. In

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business, innovation often results when ideas are applied by the company in order
to further satisfy the needs and expectations of the customers.

According to Knight (1997) and Kreiser, Marino and Weaver (2002) in Scheepers
(2007), innovativeness refers to the capability, capacity and willingness of an
enterprise to support creativity and experimentation to solve recurring customer
problems. Innovativeness entails creativity and experimentation that result in new
products, new services, or improved technological processes (Dess and Lumpkin,
2005). It is arguably the most essential component of corporate entrepreneurship
(Fitzsimmons, Douglas, Antoncic, and Hisrich (2005).

In a social context, innovation helps create new methods for alliance creation, joint
venturing, flexible work hours, and creation of buyers' purchasing power.
Innovations are divided into two broad categories

Forms of Innovation

 Evolutionary innovations (continuous or dynamic evolutionary

innovation)that are brought about by many incremental advances in
technology or processes.
 Revolutionary innovations (also called discontinuous innovations) which
areoften disruptive and new.

Innovation is synonymous with risk-taking and organizations that create

revolutionary products or technologies take on the greatest risk because they create
new markets. Imitators take less risk because they will start with an innovator's
product and take a more effective approach.

Types of Innovation

It is remarkable how many people are under the false assumption that companies
are either innovative or not. This is a very polarizing and simplistic perspective
that does not take into account the different types of innovations that companies
can and do pursue.

Incremental Innovation
Incremental Innovation is the most common form of innovation. It utilizes your
existing technology and increases value to the customer (features, design changes,

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etc.) within your existing market. Almost all companies engage in incremental
innovation in one form or another. Examples include adding new features to
existing products or services or even removing features (value through
simplification). Even small updates to user experience can add value,
In the view of Henderson and Clark (1990) in Hager (2006), this type of
innovation improves and extends an established design. Improvement takes
place in individual components, but the basic core design concepts and the
linkage between them remain the same. An example is faster spinning hard
drives.

Disruptive Innovation
Disruptive innovation, also known as stealth innovation, involves applying new
technology or processes to your company’s current market. It is stealthy in nature
since newer tech will often be inferior to existing market technology. This newer
technology is often more expensive, has fewer features, is harder to use, and is not
as aesthetically pleasing. It is only after a few iterations that the newer tech
surpasses the old and disrupts all existing companies. By then, it might be too late
for the established companies to quickly compete with the newer technology.There
are quite a few examples of disruptive innovation, one of the more prominent being
Apple’s iPhone disruption of the mobile phone market. Prior to the iPhone, most
popular phones relied on buttons, keypads or scroll wheels for user input. The
iPhone was the result of a technological movement that was years in making,
mostly iterated by Palm Treo phones and personal digital assistants (PDAs).
Frequently you will find that it is not the first mover who ends up disrupting the
existing market. In order to disrupt the mobile phone market, Apple had to cobble
together an amazing touch screen that had a simple to use interface, and provide
users access to a large assortment of built-in and third party mobile applications.

Architectural Innovation
The essence of this type of innovation is the reconfiguration of an established
system to link together components and parts in a new way (Henderson and Clark,
1990 in Hager, 2006). According to the authors, architectural innovation does not
mean that the components remain unchanged but they are changed in a manner that
there are new ways of linkage between the components. The change is so small
that the core concept behind the changed component is the same, and the associated

27
scientific and engineering knowledge remain the same. An example is the
technologies where architectural innovations reduced the size of the hard drives
from 14-inches diameter disks to diameter of 3.5-inches, and from 2.5-inches to
1.8-inches.

Architectural innovation is simply taking the lessons, skills and overall technology
and applying them within a different market. This innovation is amazing at
increasing new customers as long as the new market is receptive. Most of the
time, the risk involved in architectural innovation is low due to the reliance and
reintroduction of proven technology. Though most of the time it requires tweaking
to match the requirements of the new market.
In 1966, NASA’s Ames Research Center attempted to improve the safety ofaircraft
cushions. They succeeded by creating a new type of foam, which reacts to the
pressure applied to it, yet magically forms back to its original shape. Originally it
was commercially marketed as medical equipment table pads and sports equipment,
before having larger success as use in mattresses. This “slow spring back foam”
technology falls under architectural innovation. It is commonly known as memory
foam. Radical innovation

Radical innovation is what we think of mostly when considering innovation. It

gives birth to new industries (or swallows existing ones) and involves creating
revolutionary technology. The airplane, for example, was not the first mode of
transportation, but it is revolutionary as it allowed commercialized air travel to
develop and prosper. The four different types of innovation mentioned here –
Incremental, Disruptive, Architectural and Radical – help illustrate the various
ways that companies can innovate. There are more ways to innovate than these four.
The important thing is to find the type(s) that suit your company and turn those into
success.
Sources of Financing for Innovation and New Business Venture

Some important sources of funding for innovation activities include:

 Personal funds
 Government grants
 Family and friends
 Debt
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  Equity
 Business angels
 Venture capital
 Crowd funding

Many entrepreneurs struggle to find the capital to start a new business. There are
many sources to consider, so it is important for an entrepreneur to fully explore all
financing options. He also should apply for funds from a wide variety of sources.
Personal savings: Experts agree that the best source of capital for any new business
is the entrepreneur‘s own money. It is easy to use, quick to access, has no payback
terms, and requires no transfer of equity (ownership). Also, it demonstrates to
potential investors that the entrepreneur is willing to risk his own funds and will
persevere during hard times. Friends and family: These people believe in the
entrepreneur, and they are the second easiest source of funds to access. They do
not usually require the paperwork that other lenders require.

CHANGE MANAGEMENT

Change management is the process, tools and techniques to manage the people side
of change to achieve the required business outcome. Change management
incorporates the organizational tools that can be utilized to help individuals make
successful personal transitions resulting in the adoption and realization of change.

When your organization undertakes projects or initiatives to improve performance,

seize opportunities or address key issues, they often require changes; changes to
processes, job roles, organizational structures and types and uses of technology.
However, it is actually the employees of your organization who have to ultimately
change how they do their jobs. If these individuals are unsuccessful in their personal
transitions, if they don’t embrace and learn a new way of working, the initiative
will fail. If employees embrace and adopt changes required by the initiative, it will
deliver the expected results.

Change management is the discipline that guides how we prepare, equip andsupport
individuals to successfully adopt change in order to drive organizational success
and outcomes. While all changes are unique and all individuals are unique, decades
of research shows there are actions we can take to influence people in their

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individual transitions. Change management provides a structured approach for
supporting the individuals in your organization to move from their own current
states to their own future states.

Three Levels of Change Management

 Individual Change Management

 Organizational/Initiative Change Management
 Enterprise Change Management Capability

Individual Change Management While it is the natural psychological and

physiological reaction of humans to resist change, we are actually quite resilient
creatures. When supported through times of change, we can be wonderfully
adaptive and successful.

Individual change management requires understanding how people experience

change and what they need to change successfully. It also requires knowing what
will help people make a successful transition: what messages do people need to
hear when and from whom, when the optimal time to teach someone a new skill is,
how to coach people to demonstrate new behaviours, and what makes changes
“stick” in someone’s work. Individual change management draws on disciplines
like psychology and neuroscience to apply actionable frameworks to individual
change. After years of studying how individuals experience and are influenced in
times of change, Prosci developed the ADKAR® Model for individual change.
Today, it is one of the most widely used change models in the world.

Organizational/Initiative Change Management

While change happens at the individual level, it is often impossible for a project
team to manage change on a person-by-person basis. Organizational or initiative
change management provides us with the steps and actions to take at the project
level to support the hundreds or thousands of individuals who are impacted by a
project. Organizational change management involves first identifying the groups
and people who will need to change as the result of the project, and in what ways
they will need to change. Organizational change management then involves
creating a customized plan for ensuring impacted employees receive theawareness,
leadership, coaching, and training they need in order to change successfully.

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Driving successful individual transitions should be the central focus of the
activities in organizational change management. Organizational change
management is complementary to your project management. Project management
ensures your project’s solution is designed, developed and delivered, while change
management ensures your project’s solution is effectively embraced, adopted and
used.

Enterprise Change Management Capability

Enterprise change management is an organizational core competency that provides

competitive differentiation and the ability to effectively adapt to the ever-changing
world. An enterprise change management capability means effective change
management is embedded into your organization’s roles, structures, processes,
projects and leadership competencies. Change management processes are
consistently and effectively applied to initiatives, leaders have the skills to guide
their teams through change, and employees know what to ask for in order to be
successful.

The end result of an enterprise change management capability is that individuals

embrace change more quickly and effectively, and organizations are able to
respond quickly to market changes, embrace strategic initiatives, and adopt new
technology more quickly and with less productivity impact. This capability does
not happen by chance, however, and requires a strategic approach to embed
changemanagement across an organization

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 IDENTIFYING BUSINESS OPPORTUNITIES AND THREATS

Introduction
Before going into a business it is good to study your environment to know your
area of comparative advantage, the opportunities you are likely to enjoy and your
weakness you need to improve on in order to be able to compete comparatively
with your counterparts.

SWOT Analysis
SWOT entails the objective analysis of a business’s Strengths and Weaknesses
and its Opportunities and Threats. In order to identify its strengths, weaknesses,
opportunities and threats, an organization has to carry out internal and external
evaluation and also opportunities/threats analysis and strengths/weaknesses
analysis.

The Internal Evaluation starts with; The identification of the profit contribution
of each area, followed by allocation of resource, determination of risks involved,
variety reduction, realistic allocation of costs and the assessment of company
resources.
External evaluation starts with the determination of market stranding,
determination of competitors’ strengths and weaknesses, assessment of the
vulnerability of the business’ main products to substitutes, assessment of the
effects of economic changes on the business, inter firm comparisons and Stock
Market Valuation in terms of an assessment of the company’s vulnerability to
takeover (Dixon-Ogbechi, 2003).

Strengths/Weaknesses Analysis
Involve scanning the internal environment of the business in order to identify its
strengths and weaknesses. The entrepreneur needs to evaluate the strengths and
weaknesses of the business periodically. Also, the entrepreneur can assess the
internal environment of the business by critically looking at the internal factors in
terms of the 5s, namely: Skills, Strategy, Staff, Structure, Systems and Shared
Values (Dibb, Simkin, Pride, & Ferrell, 1991; Aluko, Odugbesan, Gbadamosi &
Osuagwu, 1998; Business-Plan, 2010).

32
To do this effectively the entrepreneur needs to ask him/herself and answer
questions pertaining to the 5s (five ‘s’) in terms of their strengths and weaknesses
by developing questionnaires to ask questions pertaining to major internal
environmental factors such as:

Skills:
 What skills do the organizational members possess?
 What are the distinctive competencies of the organization?
Strategy:
 Does your business have a clear vision and mission? Are your business
objectives/goals derived from its mission?
 Does your business have plans?
 Do you follow the laid down plans of the business as scheduled?
 Does your business have clear strategies to operationalize its policies?
 What skills do the organizational members possess? What are the
distinctive competencies of the organization?
Staff:
 Does the business have qualified staff for the relevant positions?
 Are the staffs rightly placed?
 Does the business have adequate number of personnel to man the various
positions?
Structure:
 Does the business have an organizational structure or organogram?
 What type of organization structure does your business adopt?
 Are there clear lines of reporting and communication?
 Systems: Does your organization have a system?
 What kind of systems (e.g. MIS, Accounting, Quality Control, and
Inventory) does your business have in place? (BusinessPlan, 2010).
If the answers to these questions are positive/or the factors are present, then you
record them as strengths and if the answers are negative/ the factors are absent,
then you record them as weaknesses. After this, each factor is rated as to whether
it is a major strength, minor strength, neutral factor, minor weakness, or major
weakness (Business-Plan, 2010).

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 Opportunities and Threats Analysis
This involves scanning the external environment of the business in order to
identify the Opportunities and Threats. The entrepreneur can assess the external
environment of the business by critically looking at the opportunities and threats
emanating from changes in the major external environmental factors.

For instance
 Opportunities in the technological environment could be availability of
advanced technology, developments in Information Technology like the
advent of the GSM;
 Opportunities in the Political/Legal environment could be favorable
government policies, tax holidays;
 Opportunity in the Demographic environment could be great market
demand;
 Opportunities in the Economic environment could be growing export
market increased consumer spending and growing industry.

Positive seasonal influences are an opportunity in the natural environment;

opportunities in the other environment could be change in consumers taste in
favour of your product and Intermediaries’ cooperation. Examples of threats in
some external environmental factors can come from direct competitors, indirect
competitors, consumers, substitute products or services and suppliers customers
brand switching and innovations by competitors (Dixon Ogbechi, 2003; Business-
Plan, 2010).

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