ENTREPRENEURSHIP & INNOVATION

Course Instructor
Ashenafi Chanie
COURSE OUTLINE
Chapter One: Introduction
Entrepreneurship to
Chapter
Chapter Two:
Three:Small Business
Innovation
Chapter
plan Four: Development of Business
Chapter Five: Corporate
entrepreneurship
Chapter
Chapter Six: Social
Seven: entrepreneurship
Entrepreneurship and
Development

2
 Chapter One
Introduction to Entrepreneurship

3
LEARNING OBJECTIVES

• At the end of this chapter, students will be able to:

• define entrepreneurship
• describe historical development of entrepreneurship
• describe characteristics of entrepreneurs
• explain the of role of entrepreneurship in national economy

4
Chapter one :Introduction

There are four basic factors of production:

1. Land
2. Labor
3. Entrepreneurship
4. Capital

5
1.1 Entrepreneurship
The concept of entrepreneurship varies from country to country as
well as from period to period and the level of economic development
thoughts and perceptions; a concise and universally accepted
definition has not yet emerged.

Example:
 In the earliest period: An entrepreneur was viewed as a go- between,
who attempt to establish trade routes and signed contracts with many
persons (forerunners of today's venture capitalist) to sell goods.
While the capitalist was a passive risk bearer, the merchant adventure
took the active role in trading, bearing all the physical and emotional
risks.
con’td
 In the Middle Ages: The term entrepreneur used to describe a
person managing large production projects.
In this case, the person would not take any risks but would
merely manage the project using the resource provided.
In the 18th century, The Irishman named Richard Cantillon, who
was living in France, credited to being the first to use the term
entrepreneur in the business context.
He viewed the entrepreneur as a risk taker, seeing the
merchants, farmers, crafts men, and other sole proprietors buy
products at certain price –therefore, operating at a risk
condition.
Cont’d
 In the late 19th and early 20th centuries, entrepreneurs
were frequently not distinguished from managers and were
viewed mostly from an economic perspective.
The entrepreneur organizes and manages an enterprises
for personal gain.
 20th century: The function of the entrepreneurs is to
recreate or revolutionize the pattern of production by
introducing an invention.
Innovation, the act of introducing some new ideas, is one
of the most difficult tasks for the entrepreneur
Cont’d
Karl Vesper: has researched entrepreneurship and explained that
its nature is a matter of individual perception.
• To an economist: an entrepreneur is one who brings resources;
labor, materials, and other assets in to combination that makes
their value greater than before.
• To a psychologist: such a person is typically driven by behavioral
forces like need to obtain, to experiment, to accomplish
something, or perhaps to escape authority of others.
• To capitalist philosophers: an entrepreneur is the one who
creates wealth for others as well, who finds better ways to utilize
resources and reduce waste and who creates job that others are
glad to get.
 Entrepreneurship: Concepts…..
Fundamentally, entrepreneurship is a human creative
act, involved building a team of people with
complementary skills and talents. And there have been
hundreds of definitions in dozens of books. Such
definitions include, an entrepreneur is:
• A decision maker whose entire role arises out of his
alertness to hitherto unnoticed opportunities (kirzner-
1973).
• Who uses available resources in novel ways
(Schumpteter-1934).
Cont’d
• Are action oriented, highly motivated individuals who
take risk to achieve goals.
• Are people who have the ability to see and evaluate
business opportunities, the ability to gather resources to
take advantage of them; and the ability to initiate action
to insure success?
• Is someone who always searches for change, responds
to it, and exploits it as an opportunity (Peter Drucker,
1985).

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Cont.d
In almost all of the definitions, there is an agreement
that we are talking about a kind of behavior that
includes:
• Initiative taking
• The organizing and reorganizing of social/economic
mechanisms to turn resources to practical account, and
• The acceptance of risk or failure, etc.
Cont’d

Robert Hisrich (1985), defined entrepreneurship in a relatively

comprehensive way as:

“ a process of creating some thing different with value by devoting

the necessary time, and effort assuming the accompanying
financial, psychological, and social risks, and receiving the
resulting rewards of monetary and personal satisfaction.”
1.2 Characteristics of Successful Entrepreneurs
A common stereotype of the entrepreneur emphasizes such
characteristics as a high need for achievement, willingness to take
moderate risk, and strong self-confidence. Go through the
following listed characteristics and compare them with what you
have identified.
A) Need for Achievement:
David C.Mclelland, a Harvard psychologist, discovered a positive
correlation between the need for achievement and
entrepreneurial activity. According to McClelland, those who
become entrepreneurs have, on the average, a higher need for
achievement than do members of the general population.
Entrepreneurs are driven by a need to achieve more and more.
Cont’d
B) Willingness to take risk:
The risks that the entrepreneur takes in starting and or operating their
own business are varied. By investing their own money, they assume
a financial risk. If they leave secured jobs, they risk their careers.
The stress and time required in starting and running a business may
place their families at risk. In addition, entrepreneurs who identify
closely with particular business venture assume psychic risk as they
face the possibility of business failure.
David C. McClelland discovered in his studies that individuals with a
high need for achievement also have moderate risk taking
propensities. Often enough entrepreneurs are calculated risk takers.
They enjoy the excitement of a challenge
Cont’d
C) Self-Confidence:
Studies show that successful entrepreneurs tend to be confident
individuals who see the problem in launching a new venture but believe
in their own ability to overcome these problems.
Some studies of entrepreneurs have measured the extent to which they
are confident of their own abilities. According to J.B.Rotter, those who
believe that their success depends upon their own efforts have an
internal locus of control. In contrast, those who feel that their lives are
controlled largely by luck or chance or fate have an external locus of
control.
External locus of control believing that ones life is controlled more by
luck or chance than ones own efforts. Based on research to date, it
appears that entrepreneurs have a higher internal locus of control than
is true of the population in general.
Cont’d
D) Innovation and creativity:
Innovative activity is a hallmark of entrepreneurship. The entrepreneurial
manager is constantly looking for innovations, not by waiting for a flash of
inspirations, but through an organized and continuous search for new ideas.
Entrepreneurship is not so much an art that either you have, or you do not,
but rather a practice, which you constantly follow or you choose to ignore. It
thus can be developed and learned; its core activity is innovation and a
continuous, purposeful search for new ideas, and their practical
applications.
Doing things differently is part of entrepreneur's nature. It is how they
create a market opportunity and differentiate themselves from the
multitude. Innovation can be based upon many factors from marketing to
technology.
Cont’d
E). Total commitment:
Hard work, energy, and single mindedness are all essential
elements in the entrepreneurial profile.
F). Effective time management:
Entrepreneurs are well aware that time is something that
cannot be saved if every single minute is not used worthy
enough. Establishing goals, determining deadlines,
allocating time for each and every important activity are
personality traits entrepreneurs are identified with.
Cont’d
G). An Ability of leadership:
Successful entrepreneurs are successful leaders, whether they lead
few employees or hundreds or thousands. By the very nature of
their of their work , entrepreneurs are leaders because they must
seek opportunities ; initiate business enterprises; gather the
physical, financial and human resources to carry out heir enterprise;
set goals foe themselves and for others, and direct and guide others
to accomplish goals.
To be aware of better ways to accomplish tasks is to be an effective
leader. You are likely to be successful leader if you believe in
continuous growth, improved efficiency and the continued success
of your organization.
Cont’d
H). An ability of decision making:
Successful entrepreneurs are creative decision makers. Looking
matters from different angles, gathering relevant information for
decision making and consistency are crucial in entrepreneurial
decision making.
 I). Desire for Independency:
They wish for autonomy believing that independency of action is
the only sure way to get what they need.
Note that whilst entrepreneurs may share some of these
characteristics, no one single trait can be said to be secret of
entrepreneurial success.
 1.3 The Entrepreneurial Process

The Entrepreneurial Process Consists of Four Steps

Step 1: Deciding to become an entrepreneur.
Step 2: Developing successful business ideas.
Step 3: Moving from an idea to an entrepreneurial firm.
Step 4: Managing and growing the entrepreneurial firm.

1-21
1.4 The Role of Micro and small businesses Within the
Economy
Either in the developed or developing countries, it is
presumed that small and micro business play a very
important role in one’s economy.
Micro and small businesses complement day to day life in
many aspects.
They create job opportunities, provide goods and services
of need and wants, advocate and introduce technologies
to the public use with many other detailed purposes to
the society, the country, and the world at large.
Small and Micro enterprises………
Motives of establishing a small business:
The desire for individuals to own and operate their own small
business is growing. For individuals pursuing a career in
business ownership, numerous benefits can be attained
personally as well as professionally. There are several
advantages sought of small businesses, some common are:-
• Independence: - The freedom to do things in one’s own way
outsets the responsibilities associated with the independence.
• Financial opportunities:- Many small business owners make
more money running their own company than they would be
working for some one else.
Small and Micro enterprises………
• Community service: - Sometimes individuals with an entrepreneurial
ability may come across some needs and wants of the community
and they may think that they can provide it with an exchange of
value. This community serving motive may provide an advantage.
• Job security: - when one owns a business job security is ensured.
• Family employment: - small businesses most of the time do have
vacant jobs at least for families and relatives. The perpetuation of the
business is actually dependent on extended family employment.
• Challenge: - a challenge is most of the time a good motive for
success. And only the toughest entrepreneurs come to be successful
in the ever-challenging environment of the business world. A success
advantage is exploited from the motive to challenge. Challenge gives
psychological satisfaction.
Small and Micro enterprises………
– Contributions of small and micro business.
Small and micro firms have greater contribution to a nation’s economic welfare. They
produce a substantial portion of our total goods and services. Other than
supplementing big businesses, SMEs have a number of purposes: Some are:-

• Provide new Jobs: - Because the formation, market entry as well as operation of
SMEs is relatively easy in the time, they produce the “lion’s share of new jobs,
some times adding jobs while large corporations are “downsizing and laying off
employees.
• Introducing Innovation:- A record shows that many scientific break through
originated with independent inventors and SMEs.
• Producing Goods and Services efficiently:-As there are some areas in which large
businesses are effective and efficient enough in production, there are some areas
in which small businesses are very convenient in performing activities, This
advantage of small business can easily fill the gap in efficiency of large businesses.
Small and Micro enterprises………
• Stimulating Economic Competition: - When producers consist of only a
few big businesses, the customer will be at their control they can set high
prices, withhold technological developments exclude new competitors or
other wise abuse their position of power. If competition is to have a
“cutting edge” there is need for SMEs.
• Aiding Big Business:- SMEs may provide numerous functions to big
businesses two of them are:
– Distribution function:- Whole sales and retail establishments, many of them
perform a valuable economic service by linking customers and produces of those
products.
– Supply function:- SMEs act as suppliers and subcontractors of large firms. In
addition to supplying services, directly to large corporations, small firms provide
services to customers of big business eg. Repair appliances, installation etc…
therefore large firms form a “partnership” and “strategic alliance with small firm.
1.4 Entrepreneurship, Creativity and Innovation

1. Creativity:
• Creativity is the ability to develop new ideas and to discover
new ways of looking at problems and Opportunities.
 Creativity is not ability to create out of nothing, but the
ability to generate new ideas by combining, changing, or
reapplying existing ideas.
 People become more creative when they feel motivated
primarily by the interest, satisfaction, and challenge of the
situation and not by external pressures.
2. Innovation
• Innovation is the ability to apply creative solutions to
those problems and opportunities in order to enhance
people’s lives or to enrich society.

“Don't wait for extraordinary opportunities. Seize common

occasions and make them great.
Weak men wait for opportunities; strong men make them.”

- Orison Swett Marden

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Four types of innovation

 Invention: described as the creation of a new

product, service or process
 Extension: the expansion of a product, service or
process
 Duplication: defined as replication of an already
existing product, service or process
 Synthesis: the combination of existing concepts
and factors into a new formulation
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 3. Entrepreneurship
• Entrepreneurship is the result of a process that apply both
creativity and innovation to capitalize on marketplace
opportunities.

Entrepreneurship = creativity + innovation

Thinking New Doing New

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Chapter Two: Small Business

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Learning objective

At the end of this chapter, students will be able to:

Understand Importance of MSE
 Understand economic, social & political aspects of Small
Business Enterprise
 Explain Small Business Failure Factors
 Explain Problems In Ethiopia Small Business enterprises

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2.1 Introduction

 Micro and Small Enterprises (MSE) is one of the institutions

given recognition in the country's industry development plan.

 MSE is the fact that it serves as vehicles for employment

opportunities both at urban center and rural areas reinforcing
the economic development.

• MSE serves as sources for sustainable job opportunities not

only for developing countries but also for developed
countries.
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 Cont’d

These firms can be operated by limited resources, with

fewer requirements of sophisticated machinery and modern
technology.
They can be established easily in urban, semi urban and rural
areas where the infrastructure is underdeveloped with the
objective of using local raw materials and skills.
In any country they are acting as engine of growth through
poverty and unemployment reductions.

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2.2 Definition and Importance

2.2.1 Definition of Small Businesses

 Due to lack of uniform definition of MSE across the globe,
most countries use and implement based on legal
meaning of the sector.
 MSE definition is generally consisted of three basic
criteria. These are:
1. Full timer employed manpower /head count staff/.
2. Total asset, net asset and paid capital
3. Annual turnover and they use these criteria
independently or in combination.
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• In general the following points indicate experience of
other countries.
All countries encompass the micro, small and medium
enterprises definition and support framework.
The definition of the sector is viewed from the
countries’ economic status and level of growth.
In most countries definition of the sector is
implemented uniformly and it has legal entity.

08/01/2020 36
 Cont’d
 Manpower, total asset, net asset, paid capital and
annual turnover serve as criteria independently or
jointly.
 In some countries like China, USA, South Africa, MSE are
divided in to manufacturing, construction, transport,
wholesale and retail, and service sectors based on the
type of industry.
 As to EU, most countries use uniform definition of MSE
for all sectors

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 The improved definition of MSE from Ethiopian Context
• In our country two different definitions of MSE were used
so far i.e. the 1998 definition of MSE development strategy,
and definition given by CSA.
• Improved definition for the sector was given based on the
gathered experience, by identifying the gaps of the existing
definition of MSE, including the size of employee and by
taking total asset as criteria and by dividing it in to industry
and service sector
• Considering the inflation and fluctuation/irregularity of
currency.
08/01/2020 38
 Cont’d
• Under micro enterprise level, industry sub-sectors
operating with 5 people including the owner and/or
their total asset is not exceeding Birr 100,000 (one
hundred thousand).

• Under micro enterprise level, service sub-sectors

operating with 5 persons including the owner of the
enterprise and/or the values of total asset is not
exceeding Birr 50,000(fifty thousand).

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 Cont’d
 Under small enterprise level, Industrial sub-sectors
operating with 6-30 persons and/or with a paid up
capital of total asset Birr 100,000(one hundred
thousand) and not exceeding Birr 1.5 million.

• Under small enterprises level, Service sub-sectors

operating with 6-30 persons or/and total asset, or a paid
up capital is with Birr 50,001 and not exceeding Birr
500,000 are defined officially and used in Ethiopia

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 Main sectors and sub-sectors that focus area

1. Manufacturing sector 2. Construction

 Textile  Sub-contracting
 Leather  Building materials
 Food  Traditional mining
 Beverage  Cobble stone
 Metal works  Infrastructure sub contract
 Wood works  Prestigious goods
 Agro-processing

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 Cont’d
3. Trade 4. service
• Whole sale  Transport service
• Retailer  Café and Restaurants
• Raw materials supply  Store service
 Tourism service
 Canning/packing
 Management service
 Municipality service
 Product design
 Maintenance etc.
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 5. Urban Agriculture
 Modern livestock raring
 Bee production
 Poultry
 Modern forest development
 Vegetables and fruits
 Modern irrigation
 Animal food processing

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2.2.2 Importance( Special Contributions) of Small Businesses

• Although small business pose a number of challenges to

the entrepreneur and have certain limitations,
countries‟ economy cannot do without them.

• This is because small businesses have special features

that make them superior over large ones in certain
aspects of business activities.

08/01/2020 44
Example of MSE importance
Providing Job Opportunities
Introducing Innovation
Stimulating Economic Competition

Aiding big business

Supply function: Most small businesses act as suppliers, and sub-contractor
for large firms.
The distribution function: Few large manufacturers of in expensive
consumer products find it desirable to own wholesale and retail outlets.
Producing Goods and Services

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2.3 Characteristics of Small Scale Business

• Following are the characteristics of small scale business:

High Labor Intensity
Less Capital Intensive
Use of Local Skills and Knowledge
Flexibility
Entrepreneurial Spirit
Use of Indigenous Raw Materials
Localized Operation
Lesser Gestation Period - earn after a short period of time
Workplace Culture – No work specialization

08/01/2020 46
2.4 Objectives of Small Businesses

 Employment generation
 Equitable distribution of income
 Mobilization of resources and entrepreneurial skill
 Regional dispersal of industries
 Provides opportunities for development of technology
 Promotes exports
 Supports the growth of large industries

08/01/2020 47
2.5 Small Business Failure Factors

• MSEs failure attributing by many factors. These are:

A. External factors
B. Personal (internal) factors
A. External factors
 Business cycles
 Fluctuating
 Interest rate
 Interrupted supplies
 Labor market
 Inflation
 Government regulations
 Unstable financial markets
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B. Personal (internal) factors
 Inexperience
 Arrogance
 Mismanagement
Over investment on fixed assets
Poor financial and inventory control
Poor business philosophy
Lack of planning

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2.6 Merits and Demerits of Small Businesses

 Advantages of owning a small business:

i. Independency
ii. Financial Opportunity
iii. Job Security
iv. Community Service
v. To Practice Challenge

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 Disadvantages of owning a small business:
Competition
Sales Fluctuation
Increased Responsibilities
Risk of Failure
Employee relations

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2.7 Problems of Ethiopian Small Businesses

1. Backward attitude
2. Rent seeking to provide institutional support
3. Unfamiliarity with efficient technology
4. Low managerial and technical skill
5. Limited access and limited amount of capital (Lack of
seed money)
6. Limited market linkage and networks
7. Interrupted supply of key input
8. Lack of persistency
08/01/2020 52
 Cont’d
9. Unreasonable investment of scarce finances on fixed
assets
10. Perception of MSE themselves as reflection of poverty
and backwardness
11. Waiting government for job and to solve all problems
rather than being innovative
12. Failure in developing the culture of saving
13. Living with one's income/ dependency/

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 2.10 Steps in Setting Up Small Businesses

• An entrepreneur needs to take the following steps:

1. Search for Business Idea: The task of promotion begins with
the search for a suitable business idea or opportunity.
 Sources of Business ideas
• Work experience
• Hobbies
• Deliberate search
• Observing the market
• Customers
• Government organizations
• Distribution channels, trade fair and exhibitions and mass medias
08/01/2020 54
2. Idea Processing/ Screening
• Business ideas/opportunities need to be screened and
assessed for the viability.
Criteria To Screen Business Ideas Include
 Marketability/demand
 Profitability of the idea if implemented
 Availability of raw materials
 Ease of implementation
 Financial feasibility
 Government support and incentives
 Personal goals and competencies of the entrepreneur
08/01/2020 55
3.Idea selection
•The feasibility report is analyzed to finally choose the most promising idea.
4.Assemble the necessary input requirements
•Assembles the necessary resources to launch the enterprise like:

Choose partners/collaborators

Collect the required finance

Acquire land and buildings

Plant and machinery

Furniture and fixtures

Patents

Employees

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5. Establish the Enterprise
The form of ownership is to be decided upon and the
company formed and registered.
Dealing with various government bodies and other
institutions like:
Financial institutions- for finance
Sales tax, Income tax authorities- for respective
registration
Licensing authority- for obtaining industrial license

08/01/2020 57
Cont’d
 Municipal Authorities and Electricity- for requisite utilities.
Directorate of Industries, Municipal Authorities etc.
for land, factory and shed etc.
Ordering machineries from suppliers
Recruitment of staff
Arranging supplies of materials
 Arranging for distribution of the product

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Chapter Three
Innovation

59
Learning Objective
At the end of this chapter, students will be able to:
 Understand the opportunity identification process
 Understand the concept of Innovation
 define and illustrate the sources of innovative ideas for
entrepreneurs
 Examine the role of creativity and major components of the
creative process
 Introduce the four major types of innovation: invention, extension,
duplication, and synthesis

60
3.1 Opportunity Identification: The Search for New Ideas

• Opportunity identification is central to entrepreneurship

and involves:
– The creative pursuit of ideas
– The innovation process
• The first step for any entrepreneur is the identification of
a “good idea.”
– The search for good ideas is never easy.
– Opportunity recognition can lead to both personal and
societal wealth.
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 3.2.Entrepreneurial Imagination and Creativity

• How entrepreneurs do what they do:

– Creative thinking + systematic analysis = success
– Seek out unique opportunities to fill needs and wants
– Turn problems into opportunities
– Recognize that problems are to solutions what
demand is to supply

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3.3. The Role of Creative Thinking
• Creativity
– The generation of ideas that result in the improved
efficiency or effectiveness of a system.
• Two important aspects of creativity exist:
– Process
• The process is goal oriented; it is designed to attain
a solution to a problem.
– People
• The resources that determine the solution
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3.4The Nature of the Creative Process
• Creativity is a process that can be developed and
improved. Some individuals have a greater aptitude for
creativity than others.
• Typical Creative Process
– Phase 1: Background or knowledge accumulation
– Phase 2: The incubation process
– Phase 3: The idea experience
– Phase 4: Evaluation and implementation

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 5.2 Two Approaches to Creative Problem Solving

Adaptor Innovator
Employs a disciplined, precise, methodical Approaches tasks from unusual angles
approach
Is concerned with solving, rather Discovers problems and avenues of
than finding, problems solutions
Attempts to refine current practices Questions basic assumptions related to
current practices
Tends to be means oriented Has little regard for means; is more
interested in ends
Is capable of extended detail work Has little tolerance for routine work
Is sensitive to group cohesion and Has little or no need for consensus; often is
cooperation insensitive to others
Arenas in Which People are Creative
Idea
Idea
Creativity
Creativity
Spontaneous
Spontaneous Material
Material
Creativity
Creativity Creativity
Creativity

Types
Types of
of
Creativity Organization
Organization
Inner
InnerCreativity
Creativity Creativity Creativity
Creativity

Relationship
Relationship
Event
EventCreativity
Creativity Creativity
Creativity
3.5 The Creative Climate
• Characteristics of a creative climate:
– A trustful management that does not overcontrol the
personnel
– Open channels of communication among all business
members
– Considerable contact and communication with
outsiders
– A large variety of personality types
– A willingness to accept change
Cont.
– Little fear of negative consequences for making a
mistake
– The selection and promotion of employees on the
basis of merit
– The use of techniques that encourage ideas, including
suggestion systems and brainstorming
– Sufficient financial, managerial, human, and time
resources for accomplishing goals
– An enjoyment in experimenting with new ideas
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 3.6 The concept of Innovation
•Innovation is widely recognized as one of the important
dimensions of corporate entrepreneurship.

•For example, Lumpkin and Dess (1996) argue that a key

dimension of an entrepreneurial orientation is an emphasis
on innovation.
Cont.
• Innovation is also one aspect of the enterprising activity.
For instance, Schumpeter (1934) positioned the
entrepreneur as an agent of change, whose creative
behaviour in terms of different innovation aspects was
seen as a creative disruption in the economic
equilibrium of an industry.
Cont.
• There are certain views that relate and sometimes
interchange innovation with invention as well as
creativity. But in relative terms there is a conceptual and
practical distinction between these three concepts.
• creativity is the antecedent of innovation and that
invention is the discovery of new thing that didn’t exist,
where as innovation might simply mean modifying or
improving an existing thing in a novel way.
 Cont.
• Innovation is the process of generating something new
that has a significant value to an individual, a group, an
organization, and industry, or a society. Cingula &
Veselica (2010)
• innovation is invention plus commercialization,
indicating that without innovation invention could be of
no value.
 Cont.
 Schumpeter (1934) states innovation broadly as:
i) the introduction of a new product or a new product quality;
ii)the introduction of a new production;
iii) the opening-up of a new market;
iv) the use of new raw materials or sources of semi-
manufactures;
v) the creation of a new industry business such as the
establishment of a monopoly situation for the breakdown of a
monopoly.
 Cont.
• Innovation:
– Is the process by which entrepreneurs convert opportunities
into marketable ideas.
– Is a combination of the vision to create a good idea and the
perseverance and dedication to remain with the concept
through implementation.
– Is a key function in the entrepreneurial process.
– Is the specific function of entrepreneurship.

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3.7 The Innovation Process

• Types of Innovation • Sources of Innovation

– Invention – Unexpected occurrences
– Extension – Incongruities
– Duplication – Process needs
– Synthesis – Industry and market
changes
– Demographic changes
– Perceptual changes
– Knowledge-based concepts
5–75
Types of Innovation

Invention: Totally new product, service, or process

Extension: New use or different application of an already

existing product, service, or process

Duplication: Creative replication of an existing concept

Synthesis: Combination of existing concepts and factors into a

new formulation or use

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3.8 Entrepreneurship and Innovation

• The relationship of innovation and entrepreneurship is

understood in all the studies in the area of
entrepreneurship and much of entrepreneurial
endeavour is inseparable from innovation.
 Cont.
• Peter Drucker describes innovation as the means by
which organizations create value-producing resources or
endows existing resources with enhanced potential for
creating value. It is the effort to create purposeful,
focused change in an enterprise’s economic or social
potential” (Drucker, 1985.)
Cont.
• Innovation takes several forms: in products, services,
production processes and management systems.
• Innovation in products and services is related to
“Research & Development” and meeting consumers’
needs. Innovation with respect to processes relates to
changes in machinery and other elements not directly
associated with employees and have the aim of
increasing productivity and efficiency.
Cont.
• Innovation in management systems is usually in response to
new environmental conditions, and improving the way in
which people are managed and work is organized. This form
of innovation becomes necessary by changes in the process.
• Business innovation deals with innovation in management
thinking and its primary purposes are to create new value and
wealth for all stakeholders and there by increase economic
prospects. It is motivated by changes in external and internal
environmental conditions, customers, competitors, Suppliers
and employees (Lorente, Dewhurst, Dale; 1999).
3.9 Principles of Innovation

 Be action oriented.
 Make the product, process, or service simple and understandable.
 Make the product, process, or service customer-based.
 Start small.
 Aim high.
 Try/test/revise.
 Learn from failures
 Follow a milestone schedule.
 Reward heroic activity.
 Work, work, work.

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 Chapter Four:
Development of Business plan

Lucy Academy 82
LEARNING OBJECTIVES

• At the end of this chapter, students will be able to:

• Understand benefits of business planning
• Explain stages of Business planning
• Explain contents of Business planning

83
4.1 What is business planning?
 A business plan is a written document prepared by the
entrepreneur that describes all the relevant internal and
external elements and strategies for expansion,
acquisition and starting a new venture.

 It is a integration of functional plans such as marketing,

finance, manufacturing, sales and human resources.
Cont’d
 It is your goals and how they can be achieved even
though its structure will vary depending on the nature of
the business.
 It provides an overview of the company’s situation, the
future plan, action plan, how much it will cost and what
will be the associated revenues and financial position.
 Cont’d
 It contains a description of your company’s (goods/services),
target market, marketing plan and sales strategy, a review of
financial documents and the management team.

 Business plan must describe the current status, expected

needs, and projected results of the new venture

• It demonstrates a clear picture of what the new venture is

where it is projected to go and how entrepreneur proposes
to reach there.
 Cont’d

 Business plan is not a form to be filled out at the request of

an officer, an element that must be achieved for the
bureaucracy to get a certain amount from a financier.
 The business plan is the very essence of your business and
its objectives of the entrepreneur on paper, thus requiring
maximum attention and seriousness.
 It is a way of recognizing business failure, success, growth
and idea viability.
 Cont’d
Any business plan assumes a certain sequence of
operations in 3 steps:
1. Gathering the necessary information: prices in the
market, competitors, suppliers, technical data, legal,
etc.
2. Effective planning of that activity: choosing the right
strategy and finding ways to achieve the objectives set.
3. Drafting the plan: the choice of the optimal shape of
the recipient of the presenting stage
4.3 When business plans are produced?

1. At the startup of A new business: After the initial stage of

developing ideas and feasibility study are over.
2. Business Purchase: While buying an existing business does
not negate the need for an initial business plan. This helps to
understand the level of risk that are accepted and the
likelihood of rewards being available for the buyers.
3. Ongoing Process: A periodic review with the business plan is
required in the constantly changing environment.
4. Major Decisions: Even if planning is not carried out on a
regular basis, it is usually instigate at a time of major change.
 4.4 Who Makes The Business Plans?

1. Manager: The management of a small enterprise is the only

people likely to be sufficiently knowledgeable to produce a business
plan.
2. Owners: The managers of a small enterprise may also be the
owners and take a keen interest in the planning process.
 A plan may be intended for prospective equity partners
 Either a sleeping partner looking for an investment, or
 An active partner looking to join an existing small business.
 Owners may also be lenders, who take an equity stake in
return for providing loans.
 Cont’d

3. Lenders: Banks are the main recipients of business

plan. They encourage the production of business plans
to justify overdrafts and loans offering literature and
advice.
• Other lenders of money, from private individuals to
venture capital companies will also expect to make
their investment decision after the presentation of a
formal business plan.
4.5 Feasibility Study
• Feasibility study is an analysis of the viability of an idea.
• The feasibility study focuses on helping answer the
essential question of “should we proceed with the
proposed project idea?”
• Individuals with business idea should conduct a
feasibility study to determine the viability of their idea
before proceeding with the development of a business.
 Cont’d

• A business plan is outline of the step-by-step procedure

that would be followed to convert a business idea in to a
successful business venture.

• Before preparing a business plan an entrepreneur

identifies an innovative idea, followed by identification
of opportunities, strength and weaknesses the business
plan get success.
Phases of feasibility study
1. Evaluate Alternatives
 The feasibility study helps to “frame” and “flesh-out”
specific business scenarios so they can be studied in-
depth.
 During this process the number of business alternatives
under consideration is usually quickly reduced.

 If the initial analysis is negative, it does not mean that

the proposal does not have merit.
 Cont’d

2. Pre-Feasibility Study
A pre-feasibility study may be conducted first to help
sort out relevant scenarios.
Before proceeding with a full-blown feasibility study,
you may want to do some pre-feasibility analysis of your
own.
If you find out early the proposed business idea is not
feasible, it will save you time and money.
 Cont’d
3. Market Assessment
 That will help to determine the viability of a proposed
product in the marketplace.

 It will helps to identify opportunities in a market or

market segment.

 If no opportunities are found, there may be no reason

to proceed with a feasibility study
4. Results and Conclusions
 The conclusions of the feasibility study should outline in depth the
various scenarios examined and the implications, strengths and
weaknesses of each.

 This is the time to be skeptical. Don’t expect one alternative to

“jump off the page” as being the best scenario.
 Feasibility studies do not suddenly become positive or negative.

 As you accumulate information and investigate

alternatives, neither a positive nor negative outcome may
emerge.
 Cont’d
 The decision of whether to proceed is often not clear cut. Major
stumbling blocks may emerge that negate the project.
 Sometimes these weaknesses can be overcome. Rarely does the
analysis come out overwhelmingly positive.
 The study will help you assess the tradeoff between the risks and
rewards of moving forward with the business project.
 Remember, it is not the purpose of the feasibility study or the role
of the consultant to decide whether or not to proceed with a
business idea.
 It is the role of the project leaders to make this decision,
using information from the feasibility study and input from
consultants.

5. Go/No-Go Decision
The go/no-go decision is one of the most critical in business
development.

It is the point of no return. Once you have definitely

decided to pursue a business scenario, there is usually no
turning back.
4.5.1 Feasibility Study vs. Business Plan

• A feasibility study is not a business plan.

• The separate roles of the feasibility study and the business plan are
frequently misunderstood.

• The feasibility study provides an investigating

function.
• It addresses the question of “Is this a viable business venture?”

• The business plan provides a planning function.

• The business plan outlines the actions needed to take the proposal
from “idea” to “reality.”
 Cont’d
• The feasibility study outlines and analyzes several
alternatives or methods of achieving business success.
• The feasibility study helps to narrow the scope of the
project to identify the best business scenario(s).
• The person or business conducting the feasibility study
may work with the group to identify the “best”
alternative for their situation.
• This becomes the basis for the business plan.
The feasibility study is conducted before the business
plan.
• A business plan is prepared only after the business
venture has been deemed to be feasible.
• The business plan provides the “blueprint” for project
implementation.
• If the venture is deemed not to be feasible, efforts may
be made to correct its deficiencies, other alternatives
may be explored, or the idea is dropped.
 4.6 The Format of a Business Plan

 Entrepreneur does the business planning in many forms,

but it requires creativity, independent thought and
strategic planning skills.
 The planning process should follow the sections of a
feasibility study, which investigates whether the idea is
capable of becoming successful.
 The business plan shows the details of why, and the
proposal is the pitching portion of the planning process.
 Cont’d
All materials can help get investors or funding.
Once the business is in operation, the planning does not end.

Business plan describes every major aspect of the

business, including goods, services, marketing, staffing,
and finance facilities.
Financial projections are also central to any business plan.
Business plans summaries operations of proposed
business, lenders and investors demand to see them as
tools for evaluating requests for financing.
 Cont’d
 Business plan should answer straight forward questions;
Where are we now?
Where do we intend to go?
How do we get there?
 All business plans include eight common elements that are
listed below.
1.Executive Summary/Synopsis

This is probably the most important section of the business plan

as most lenders and investors make a judgment about the
business using this section alone.
It should describe the most significant points from each section
and provide a compact version of your overall business plan.

It is vital to ensure that the summary both informs and interests
the reader so that they move on and read the entire business
plan.
 Cont’d
 The executive summary should only be written once you
have constructed the whole plan and include the important
highlights from each section.

 Depending on the size of the business plan or investment

proposal, the executive summary's length will vary.
However, the general consensus is that an executive
summary should be between one and three pages long.
2. Business Concept Description
This section includes detail (thorough) description about
the business.
Essentially, the same points covered in the executive
summary are covered here, but they are covered in far
greater detail.
It mentions an important area to address is the nature of
market demand.
It explain the nature of the business by clearly defining
how the firm will operate
What the founders intend to accomplish
 Cont’d

• This business concept section helps to articulate the

vision, mission, location, size, value and objective of the
company, how you plan to meet the unique needs of
your customer (company capability) and how you plan
to make money doing that.
• Generally it discusses about:
Feasibility study conducted for your product
prospective customers for your
value proposition (additional feature, quality) of
the product.
3. Goods and Service
This gives a detailed description of your product from
raw materials to finished item, like:
 Nature and feature of products
 Raw materials will be used, its cost
 Quality and availability of inputs
 Competitive advantage of the product
 Methods of manufacturing
 Proprietary protection (patents, trademarks, or
copyrights)
 Potential competing(substitute) products
4. Market Analysis/Research
The objective of market research and analysis
is to establish that a market exists for the
proposed venture.
Entrepreneurs provide a credible summary of
potential customers, markets, competitors,
and assumptions about marketing mix.
Market Research and Analysis Activities

i. Identify Potential Customers

 Demographic profile of customers like: age, sex, income etc.
 Buying habits and relevant information

ii. Evaluate Markets

• Future markets share & trends or changes
• Window of opportunity
• Niche position
iii. Analyzing competitors
• Existing competitors with similar products
• Future competitors ease of entry
• Industry structure

Iv. Describe Assumptions

• Market niche for positioning firm
• Pricing approach used in plan
• Distribution or method of making a market
5. Marketing Plan
 You must take the time to identify your customers and find
the means to make your product or service available to
them.
 The key here is time. It takes time to research and develop a
marketing plan, but it is time well spent.
 It describes an entrepreneur’s intended strategy (how the
venture will succeed)
Elements of the Marketing Plan

Product or Service: Quality and reliability, use, and how the

product or service will be positioned in growth markets.
Pricing system: Pricing methods, discounts, and quantity and
bulk prices, methods to set price
Promotional Mix: Strategy of combining appropriate uses of
public relations, advertising, displays, events, demonstrations,
personal sales
 Distribution: Use of market channels including retail,
wholesale, catalog, telemarketing, personal sales
representatives, or other approaches
 Service and warranties: Description of service-after-
sales policies, repair services, guarantees, and product
warranties.
 Marketing leadership: Define leadership roles, persons
responsible for marketing and sales
6. Management Team
The Management Team section outlines:
 Organizational Structure: Highlights the hierarchy
 Management Team: Highlights the track record of:
 The company’s managers
 Key employees including:
 Qualifications,
 Experiences, or
 Outstanding skills, which could add a competitive
edge to the image of the business.
 Outlines responsibilities and decision-making
powers
• Working Structure: Highlights how your management team
will operate within your defined organizational structure.

• Skills Gap: Highlights plans to improve your company’s overall

skills or expertise. And opportunities and plans to acquire new
information and knowledge that will add value

• Personnel Plan: Highlights current and future staffing

requirements and related costs.
7. Operations and Management
 Organizational Structure of the company that provides a
basis for projected operating
expenses and financial statements.
 Expense and Capital Requirements to support the
organizational structure.
 It provides a basis to identify personnel expenses,
overhead expenses, and costs of
products/services sold. These expenses/costs can then be
matched with capita requirements.
8. Financial Plan
 Since money is the objective measure used to gauge a
firm’s progress.
 Financial statements for a new venture are projections
based on previously defined operating and marketing
assumptions.
 In short the financial plan section:
Clearly defines what a successful outcome entails
plan isn't merely a prediction
Provides you with a vital feedback-and-control tool:
Variances from projections provide early warnings of
problems.
Anticipate problems: If rapid growth creates a cash
shortage due to investment in receivables and
inventory, the forecast should show this.
Some elements of the financial plan include:
Break-even Analysis
Projected Profit and Loss
Projected Cash Flow
Projected Balance Sheet
Business Ratios
 Chapter Five
Corporate entrepreneurship

123
learning Objectives

At the end of this chapter, students will be able to:

 To understand the entrepreneurial mindset in organizations
 To illustrate the need for entrepreneurial thinking in organizations
 To understand corporate entrepreneurship

124
5.1. The concept of corporate entrepreneurship

• There is an increasing interest on the area of corporate

entrepreneurship recently, in the academic and
practitioners domain, because it has certain positive
business outcomes.
• For instance, Blau and Wagner (2010) state that corporate
entrepreneurship is one of the ways to enhance
innovative and entrepreneurial activity of employees and
to increase firm performance through the creation of new
products, services, strategy and organisational conditions.
Cont.

• It is the practice of composing new business products and

opportunities in an organization by proactive empowerment
(Essley and Longenecker; 2006).
• Some researchers posit that the term corporate
entrepreneurship refers to a process that goes on within a
founded firm, regardless of its size, and leads not only to new
business ventures but also to other innovative activities and
orientations such as development of new products, services,
technologies, managerial techniques, strategies, and
competitive postures (Antoncic and Hisrich, 2001).
 Cont.
• According to empirical researches entrepreneurship can
be defined as a process encompassing activities such as;
the creation of wealth, the creation of enterprise, the
creation of innovation, the creation of change, the
creation of employment, the creation of value and the
creation of growth (Morris, et al. 2008).
Cont.
• In entrepreneurship, the creation of enterprises are
pursued by owner managers. In contrast, corporate
entrepreneurship occurs when the same perspectives
are undertaken by employees for their organization
within the organization.
Cont.
• Supporting this view, Antoncic&Hisrich (2001) considered
corporate entrepreneurship as a spirit of entrepreneurship
within the existing business.
• Developing on this tone Antoncic and Hisrich (2001), define the
term corporate entrepreneurship as a process that goes on
within a founded firm, regardless of its size, and leads not only
to new business ventures but also to other innovative activities
and orientations such as development of new products,
services, technologies, managerial techniques, strategies, and
competitive postures.
Cont.
• The definitions provide that such creativity and innovation
is done by employees, regardless of the resources. This is
clearly indicated by the following definitions:
“Corporate entrepreneurship is the process of uncovering
and developing an opportunity to create value through
innovation and seizing that opportunity without regard to
either resources or the location of the entrepreneur”.
Antoncic and Hisrich (2001)

Lucy Academy
 5.2. The Entrepreneurial Mindset in Organizations

• Factors in the emergence of the entrepreneurial

economy:
– The rapid evolution of knowledge and technology
promoted high-tech entrepreneurial start-ups.
– Demographic trends adding fuel to the proliferation of
newly developing ventures.
– The venture capital market became an effective
funding mechanism.
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 5.2.1 Reengineering Corporate Thinking
• Steps that will help innovative people to develop an
entrepreneurial mindset:
1. Set explicit goals.
2. Create a system of feedback and positive
reinforcement.
3. Emphasize individual responsibility.
4. Give rewards based on results.
5. Do not punish failures.
Assessing Support for Innovation

• Does the firm encourage entrepreneurial thinking?

• Does the firm provide ways for innovators to stay with their
ideas?
• Are people permitted to do the job in their own way, or are they
constantly stopping to explain their actions and ask for
permission?
• Has the firm evolved quick and informal ways to access the
resources to try new ideas?
• Has the firm developed ways to manage many small and
experimental innovations?
Assessing Support for Innovation (cont’d)

• Is the system set up to encourage risk taking and to

tolerate mistakes?
• Are people in your company more concerned with new
ideas or with defending their turf?
• How easy is it to form functionally complete,
autonomous teams in the firm’s corporate
environment?
5.2.2Rules for an Innovative Environment

1. Encourage action.
2. Use informal meetings whenever possible.
3. Tolerate failure and use it as a learning experience.
4. Persist in getting an idea to market.
5. Reward innovation for innovation’s sake.
6. Plan the physical layout of the enterprise to encourage
informal communication.

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 Cont.
7. Expect clever bootlegging of ideas—secretly working
on new ideas on company time as well as personal
time.
8. Put people on small teams for future-oriented projects.
9. Encourage personnel to circumvent rigid procedures
and bureaucratic red tape.
10. Reward and promote innovative personnel.

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5.2.3 Encouraging an Entrepreneurial Environment
• Steps to help restructure corporate thinking and encourage an
entrepreneurial environment:
1. Early identification of potential entrepreneurs
2. Top management sponsorship of entrepreneurial projects
3. Creation of both diversity and order in strategic activities
4. Promotion of entrepreneurship through experimentation
5. Development of collaboration between entrepreneurial
participants and the organization at large
5.3. The Nature of Corporate Entrepreneurship
– Corporate Entrepreneurship
• Activities that receive organizational sanction and resource
commitments for the purpose of innovative results.
– A process whereby an individual or a group of
individuals, in association with an existing organization,
creates a new organization or instigates renewal or
innovation within the organization.
– A process that can facilitate firms’ efforts to innovate
constantly and cope effectively with the competitive
realities that companies encounter when competing in
international markets.
5.4. The Need for Corporate Entrepreneurship
• Rapid growth in the number of new and sophisticated
competitors
• Sense of distrust in the traditional methods of corporate
management
• An exodus of some of the best and brightest people from
corporations to become small business entrepreneurs
• International competition
• Downsizing of major corporations
• An overall desire to improve efficiency and productivity
5.5 Benefits of an Entrepreneurial Philosophy

• Leads to the development of new products and services

and helps the organization expand and grow.
• Creates a work force that can help the enterprise
maintain its competitive posture.
• Promotes a climate conducive to high achievers and
helps the enterprise motivate and keep its best people.
5.6.Corporate Entrepreneurship Strategy
– A vision-directed, organization-wide reliance on
entrepreneurial behavior that purposefully and
continuously rejuvenates the organization and shapes
the scope of its operations through the recognition
and exploitation of entrepreneurial opportunity.
– It requires the creation of congruence between the
entrepreneurial vision of the organization’s leaders
and the entrepreneurial actions of those throughout
the organization.
5.6.1 Corporate Entrepreneurship Strategy Process
• Corporate entrepreneurship strategy is manifested
through the presence of three elements:
– An entrepreneurial strategic vision
– A pro entrepreneurship organizational architecture
– Entrepreneurial processes and behavior as exhibited
across the organizational hierarchy.
 cont’d
• Linkages :
1. Individual entrepreneurial cognitions of the organization’s
members
2. External environmental conditions that invite entrepreneurial
activity
3. Top management’s entrepreneurial strategic vision for the firm
4. Organizational architectures that encourage entrepreneurial
processes and behavior
5. The entrepreneurial processes that are reflected in entrepreneurial
behavior
6. Organizational outcomes resulting from entrepreneurial actions.
 Cont’d
• Critical steps of a corporate entrepreneurial strategy:
– Developing the vision
– Encouraging innovation
– Structuring for an entrepreneurial climate
– Developing individual managers for corporate
entrepreneurship
– Developing venture teams.
5.6.Dimensions of corporate Entrepreneurship

• Corporate entrepreneurship is characterised by certain

components, and these components have been broadly
described as the dimensions of corporate
entrepreneurship by different scholars.
Cont.
• These dimensions generally fall under the eight broad
components as outlined by Antoncic and Hisrich (2003), namely:
(1) new venture creation;
(2) new businesses creation;
(3) product/service innovativeness;
(4) process innovativeness;
(5) self-renewal;
(6) risk taking;
(7) proactiveness; and
(8) competitive aggressiveness.
 1. New Ventures and New Businesses

• new business venturing refers to Start-up entity

developed with the intent of profiting financially.
• A  business venture may also be considered a small
business.
• Many ventures will be invested in by one or more
individuals or groups with the expectation of the
business bringing in a financial gain for all backers.
 Cont.
• Most business ventures are created based  on
demand of the market or a lack of supply in the
market. needs of consumers are identified for
a product or a service and the entrepreneur
and investors will proceed to develop the idea, market
the idea, and sell the product or service developed
 Product/Service and Process Innovation

• Innovation is considered as one of the basic dimensions

characterising corporate entrepreneurship. And it includes
product and process innovation. According to Knight (1997),
the innovation dimension of entrepreneurship refers to the
pursuit of creative or novel solutions to challenges confronting
the firm, including the development or enhancement of
products and services, as well as new administrative
techniques and technologies for performing organizational
functions (e.g. production, marketing, sales, and distribution).
 Self-renewal

• The self-renewal dimension imitates the transformation

of organizations through the renewal of basic ideas on
which they are built. It has strategic and organizational
change nuances and includes the redefinition of the
business conception, reorganization, and the introduction
of system-wide changes for innovation (Antoncic and
Hisrich; 2001). Renewal is necessary because most
organisations cannot innovate as fast as the market,
especially when they are stable (Henk W. Volberda, 1997).
 Cont.
• And, Organizations should be involved in implementing
planned organizational renewal initiatives based on
standards of excellence, market awareness, people
development and the right balance between internal
and external environments of the organization.
Organizational renewal is a deliberate strategy for
organizational performance and long term survival
(Sonia et al., 2012).
 Proactiveness

• Another important dimension of corporate

entrepreneurship is proactiveness, which is the ability of
an organisation to introduce new products or services
ahead of the competitors and the ability to anticipate
the future demand to create change and to shape the
environment (Ambad & Wahad, 2013). Besides, this first
mover approach allows firms to exploit emerging
opportunities in the market and thus creating superior
competitive advantage
 Cont.
• Proactiveness indicates a company’s determination to
follow promising opportunities, rather than only
responding to competitors’ moves (Zahra and Garvis;
2000). Similarly Antoncic and Hisrich, (2003) relate the
concept to the extent to which organizations attempt to
lead rather than follow competitors in such key business
areas as the introduction of new products or services,
operating technologies, and administrative techniques .
 Risk-taking

• Probably one of the central dimensions of corporate

entrepreneurship is risk taking. And risk taking exists in
both independent entrepreneurship and corporate
entrepreneurship because;Entrepreneurs /Intrapreneurs
are considered as risk takers who are willing to commit
their time and energy to making a good idea an
innovative reality in their organization (Covin and Slevin,
1991).
 Competitive Aggressiveness

• Competitive aggressiveness refers to the company’s

tendency to challenge its competitors. Competitive
aggressiveness is an administrative tendency expressed
in an organizational willingness to take on and dominate
competitors. Entrepreneurial condition is fairly reflected
in the firm’s tendency to aggressively compete with
industry rivals (Antoncic&Hisrich, 2003). Competitive
aggressiveness marks the company’s aggressive attack
to competitors.
The Corporate Entrepreneurship Process

Strategic
Strategic Corporate
Corporate
Innovation
Innovation
Renewal
Renewal Venturing
Venturing

Corporate
Corporate
Entrepreneurship
Entrepreneurship
 Chapter Six
Social entrepreneurship

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Chapter Objectives
 At the end of this chapter, students will be able to:
 To examine the concept of “social entrepreneurship”
 To introduce the challenges of social enterprise
 To discuss the importance of ethics for entrepreneurs
 To define the term “ethics”
 To study ethics in a conceptual framework for a dynamic
environment

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 6.1 The concept of social entrepreneurship
• Social Entrepreneurship:
– A new form of entrepreneurship applys to social problem
solving traditional, private-sector entrepreneurship’s focus on
innovation, risk-taking, and large scale transformation.
– identifying a stable but inherently unjust equilibrium that
causes the exclusion, marginalization, or suffering of a
segment of humanity that lacks the financial means or
political clout to achieve any transformative benefit on its
own;
.
 Cont.
 identifying an opportunity in this unjust equilibrium, developing a
social value proposition, and bringing to bear inspiration, creativity,
direct action, courage, and fortitude, thereby challenging the stable
state’s hegemony; and

 forging a new, stable equilibrium that releases trapped potential or

alleviates the suffering of the targeted group, and through imitation and
the creation of a stable ecosystem around the new equilibrium ensuring
a better future for the targeted group and even society at large.
 Cont.
• Hence, Social entrepreneurship is a process by which
citizens build or transform institutions to advance
solutions to social problems, such as poverty, illness,
illiteracy, environmental destruction, human rights
abuses and corruption, in order to make
life better for many.
6.2.Social Entrepreneurship Process

– Recognition of a perceived social opportunity

– Translation of the social opportunity into an
enterprise concept
– Identification and acquisition of resources required to
execute the enterprise’s goals

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6.3. Social Entrepreneurs

– A person or small group of individuals who founds and/or

leads an organization or initiative engaged in social
entrepreneurship.
– Also referred to as “public entrepreneurs,” “civic
entrepreneurs,” or “social innovators.
6.4 Characteristics of Social Entrepreneurs as Change Agents

– Adoption of a mission to create and sustain social value (beyond

personal value)
– Recognition and relentless pursuit of opportunities for social
value
– Engagement in continuous innovation and learning
– Action beyond the limited resources at hand
– Heightened sense of accountability
– Exhibiting a heightened sense of accountability to the
constituencies served and for the outcomes created.
6.5. The Social Enterprise Challenge
• Social Obligation
– Firms that simply react to social issues through obedience
to the laws.
• Social Responsibility
– Firm that respond more actively to social issues;
accepting responsibility for various programs.
• Social Responsiveness
– Firms that are highly proactive and are even willing to be
evaluated by the public for various activities.
• Chapter Seven: Entrepreneurship and Development

Lucy Academy 166

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