Designing an Innovation Course: Part 4: An Introduction to Entrepreneurship in Technology

In Part 3 I looked at an "Introduction to Innovation" for a course in "Innovation, Commercialization and Entrepreneurship in Technology". After more open access searching I identified the Open University (UK) module on "Entrepreneurial behavior" to be most useful.

The OU UK course notes were 6,925 words (equivalent to 15 pages). This is far in excess of the amount of material needed for a one to two hour learning module. The OUUK document contained some copyright material which I have deleted. Reducing some of the verbose language, reduced the notes to about half the size (3,200 words, six pages). The images in the OU module were also too low resolution to be usable and have been omitted and new images added from OER sources. The OU notes used images to show tables, contrary to web accessibility guidelines, so some of these had to be transcribed (others omitted). The notes also contained more student exercises than could be undertaken in 90 minutes and two thirds of these have been omitted. I added some new video (as the OU video was of too low resolution), activities and adapted questions.

The OU course materials included interactive quizzes for the student. However, these where simply free-form text questions. Without anyone to provide feedback to the student, these are of little value. As a result the quiz questions have been adapted to forum topics for students to answer and then discuss in a Moodle forum with other students. Students can then rate the responses from each other. Where the OU quizzes were, a new multiple choice quiz, using some of the course content has been added.

An Introduction to Entrepreneurship in Technology

Introduction

Entrepreneurs may be broadly defined as people who manage a business with the intention of expanding that business by applying some form of innovation and with the leadership and managerial capacity for achieving their goals, generally in the face of strong competition from other firms, large and small. The overall aim of this unit, therefore, is to provide you with opportunities to consider and reflect on the personal aspects involved in transforming an innovative idea into an entrepreneurial product.

Learning outcomes

After studying this unit you should:

• understand the nature of entrepreneurship;
• understand the function of the entrepreneur in the successful, commercial application of innovations;
• confirm your entrepreneurial business idea;
• identify personal attributes that enable best use of entrepreneurial opportunities;
• explore entrepreneurial leadership and management style;
• identify the requirements for building an appropriate entrepreneurial team.

Economic function of the entrepreneur

Entrepreneurs have two roles in the economy: to introduce new ideas, and to energise business processes.The term entrepreneur, derives from the French words entre (between) and prendre (to take), referred to someone who acted as an intermediary. The term was originally used to describe the activities of what today call an impresario, a promoter or a deal maker. The role of the entrepreneur now is to conceive a business idea in terms of an innovation to be brought successfully to the market and to find the wherewithal to make this happen. The entrepreneur does not necessarily need to have the design, production or delivery skills, nor do they shoulder all of the risk, but the successful management of risk is an important entrepreneurial attribute.

Hub Global Network, Practice Gathering l, Milan, (CC BY-SA 2.0) 2011

Austrian economist Joseph Schumpeter (1934), who has had a seminal influence on entrepreneurship, as well as innovation, placed the entrepreneur at the centre of his theory of economic development. Schumpeter defined the entrepreneur simply as someone who acts as an agent of change by bringing into existence a ‘new combination of the means of production’. New combinations include process, product and organisational innovations. The means of production includes capital, equipment, premises, raw materials, labour and, in recent times, information. Currently, knowledge has been added to the list as the indispensable ingredient for business success in the new millennium.

The essence of Schumpeter's approach is that entrepreneurs are competitive and always strive to gain an edge over their competitors. When they begin to consolidate and slow down, they revert to being ordinary managers and, in Schumpeter's terms, are no longer entrepreneurial. Thus attitudes to growth and the actual attainment of growth are essential elements of the concept of entrepreneurship. The attainment part of the concept, of course, implies a high level of managerial competence in all these five stages:

Idea > attracts > Entrepreneur > seeks > Capital > enables > Team/Firm >compete > Market

Table 1: Business Completion Chain

Also a high competence in social and commercial interactions outside the firm with other firms, regulators and, above all, customers and consumers is required. This implies that entrepreneurial firms that innovate successfully and encourage new innovations are likely to be different from most other firms. They appear to be more open and supportive of different opinions and ideas. If you are developing your own idea as part of an organisation (or if you feel that your idea will need the combined efforts of a firm for its implementation), Activity 1 will help you identify where you need to develop and negotiate support both inside and outside the firm. The art of negotiation is a key entrepreneurial skill.

Activity 1

Referring to the characteristics of successful innovation, complete the Characteristics of the entrepreneurial firm checklist.

Consider the ideal firm for bringing your idea to market (or if your ideas have not yet crystallised, an enterprising group or firm of at least two other people you know). Make a note about the purpose of the firm or team before you answer the questions.
Try to answer the following questions (pausing for reflection if you need to.) If the answer is ‘Yes’ write a brief example. If the answer is ‘No’, write the main reason.

Characteristics of the entrepreneurial firm checklist

Try and record detailed answers to the following questions in your learning journal. Select the question mark if you need advice:

1. Does the first have strong confidence in its technical capabilities and knowledge?
2. Is there a strongly shared culture and values?
3. Is there a strong customer focus?
4. Is development and project work carried out in cross-functional teams?

The characteristics of entrepreneurial firms that are successful at launching innovations have been widely studied and are reflected in the questions asked in Activity 1. However, at this stage you may be a long way off starting, or helping to start, your own firm. The checklist should serve as a useful tool for gauging the innovative support from your current situation and as a guideline for the sort of atmosphere that needs to develop in a firm in order to maximise its entrepreneurial potential. When faced with very real resource constraints, maintaining motivation to set up and run such a firm can be very tough. The main motivation for entrepreneurs to overcome the barriers of economic pressure and uncertainty, according to Schumpeter (who was writing in the 1930s), were the prospects of upward social mobility into the capitalist class. At the start of the 21^st century, with the almost universal dominance of market-based economic systems and a hugely increased middle class, the need to cope with the direct and indirect threats of ‘globalisation’ is now often cited as the spur to innovation. For others, economic survival or the chance to create something of value are the driving motivators. Whatever the personal ambitions of entrepreneurial small firm owners, their role in introducing innovations and in improving overall economic development and efficiency is important.


Basically, the concept of development from an economic viewpoint means the growth of goods and services in an economy usually measured in total or per capita rates of growth in all goods and services, known as the Gross Domestic Product (GDP) or the Gross National Product (GNP) when nationally owned overseas goods and services are included. In advanced industrial economies such as Britain, France, Germany and so on, policy objectives tend to be targeted on improving economic performance rather than development per se. As an alternative to an economic approach, one of the best known psychologically based economic development models that is still very influential, David McClelland's achievement motivation model, pays less attention to structural factors while the psychological determinants of economic behaviour are more strongly emphasised:

Some wealth or leisure may be essential to development in other fields the arts, politics, science, or war but we need not insist on it. However, the question why some countries develop rapidly in the economic sphere at certain times and not at others is in itself of great interest, whatever its relation to other types of cultural growth. Usually, rapid economic growth has been explained in terms of ‘external’ factors favourable opportunities for trade, unusual natural resources, or conquests that have opened up new markets or produced internal political stability. But I am interested in the internal factors in the values and motives men have that lead them to exploit opportunities, to take advantage of favourable trade conditions; in short, to shape their own destiny. (McClelland 1968, p. 74)

McClelland's preferred entrepreneurial motivator, the need for achievement or nAch as it is usually abbreviate – ‘a desire to do well, not so much for the sake of social recognition or prestige, but to attain an inner feeling of personal accomplishment’ – is a more psychologically-based theory. McClelland himself summarised an alternative economic development theory as ‘a society with a generally high level of nAch will produce more energetic entrepreneurs who, in turn, produce more rapid economic development’. However, McClelland was quite disparaging about the profit motive as the mainspring of entrepreneurial activity:

Since businessmen had obviously shifted their concern from intrinsic worth to money worth, Marx and other economists endowed man with a psychological characteristic known as the ‘profit motive’. The capitalist, at any rate, was pictured as being driven by greed, by the necessity of making money or keeping up his rate of profit.

That such an assumption is a typical oversimplification of rational or armchair psychology has recently begun to be realised by historians in particular who have studied the lives of actual business entrepreneurs in the nineteenth century. Oddly enough, many of these men did not seem to be motivated by a desire for money as such or by what it would buy. (McClelland 1961, p. 233)

Clearly, the ‘oversimplification’ of the profit motive determining economic development has survived longer than McClelland believed it would and remains a central pillar to current business and economic analysis. Other motives include the need for autonomy, to ‘be my own boss’, to support a preferred lifestyle, to provide security for the family, to achieve social status and so on. Nevertheless, earning profits and making money also feature as important motives and the potential profitability of a new product is still usually the acid test of its likely viability. And well know entrepreneurs to the press and public are usually very successful and very rich business owners.

Entrepreneurial qualities

It is now widely accepted that, apart from the start up phase, most small firms in Europe are more concerned about survival rather than growth and relatively few are especially entrepreneurial (Gray 1998). Consequently, a lot of research in this field has focused on finding the characteristics that set entrepreneurs and their firms apart from others. Elizabeth Chell (1985, 1999), a social psychologist, has examined numerous psychological trait-based approaches and concluded that, whilst psychological aspects such as ‘entrepreneurial intention’ and the ‘ability to recognise opportunities’ are strongly linked to entrepreneurial behaviour, the context in which the entrepreneur operates is also very important. Entrepreneurship reflects complex interactions between the individual and the situation, which has to be dynamic because business situations are always changing.


Perceptions and judgement are, therefore, key elements in this process. Indeed, more than 20 years ago, Mark Casson (1982) identified ‘judgement’ as one of the qualities that distinguishes the successful entrepreneur from the much larger group of non-entrepreneurial SME owners. As mentioned before, business judgement can reflect an innate ability but most frequently it directly derives from experience (or, more accurately, learning from experience). However, past experience can also filter out our ability to spot new opportunities or threats. Cultural effects related to family, locality and friends can help us interpret the world but they can also colour what we see. The same may be true of the influences from various networks that business owners often belong to (ranging from business associations such as Chambers of Commerce, business clubs and so on, to more social links related to, say, sport or leisure activities). And, of course, our own expectations and motivations of what we hope for in life, at work and in terms of a career will affect both judgement and business behaviour. The Open University Business Schools (OUBS) has conducted research in this area over the years. The findings from many different entrepreneurial firms, which reveal various influences and feedback loops on the owner-manager's decision-making. Apart from the effects of the various influences that can affect business judgements, the main points to note are:

1. Business situations consist of real challenges, constraints and opportunities that directly impact on the business performance of a firm.
2. However, it is how entrepreneurs perceive these that guide their judgments and actions (which is why accurate market information, the ability to learn and experience are so important).
3. Business perceptions are also influenced by personal and business motivations, peer pressures and cultural influences (it could be argued that entrepreneur's perceptions are more closely aligned with reality).
4. Entrepreneurial behaviour is guided by the entrepreneur's expectations rather than a rigid set of strategic objectives (again, it may be that the entrepreneur's expectations are more realistic and, maybe, more ambitious than those of other business managers).
5. The process is not static but very dynamic with feedback and signals from the market consciously and indirectly affecting later decisions and actions.

As each context and set of market signals reflect industry, regional and life-cycle influences, it is difficult to believe that each entrepreneur needs the same set of skills in order to achieve success. To date, researchers have not been able to identify a core and necessary bundle of attributes, characteristics or qualities that mark out successful entrepreneurs unerringly from the large crowd of business owners. However, a commonly quoted empirical and desk research study of new venture start-ups, that has stood the test of time over the past quarter-century, was conducted through the Massachusetts Institute of Technology by Jeffrey Timmons and colleagues (Timmons et al. 1977). They identified 14 important entrepreneurial characteristics of successful enterprise owners (see Table 2) which still frequently crop up in entrepreneurship research.

Table 2: Behavioural charcteristics of entrepreneurs

1. drive and energy
2. self-confidence
3. high initiative and personal responsibility
4. internal locus of control
5. tolerance of ambiguity
6. low fear of failure
7. moderate risk taking
8. long-term involvement
9. money as a measure not merely an end
10. use of feedback
11. continuous pragmatic problem solving
12. use of resources
13. self-imposed standards
14. clear goal setting.

Timmons admitted that few entrepreneurs would possess all traits but felt that strengths in one might compensate for weaknesses in others. Many of these characteristics are self-explanatory (such as high personal drive and energy, self-confidence and setting clear goals) and some appear to be linked. Others may be less obvious or well-known, such as money and profits being used as a measure of success compared with others but less as an end in itself. Helping you to develop the last quality in the list, the ability to set clear goals, is the ultimate objective of this unit.

Activity 2

• How many of the entrepreneurial qualities listed in Table 2 do you feel already, in the main part, apply to you?
• Which ones do you feel a need to find out more about?
• Which ones have you already identified as needing more development?

These characteristics appear consistently in other entrepreneurial research studies. For example, more than 20 years ago in a study of Irish entrepreneurs, Cromie and Johns (1983) identified achievement, persistence and self-confidence as general successful business characteristics as well as internal locus of control and commitment to the business, as the characteristics peculiar to entrepreneurs. Some of the qualities that people often find a bit obscure include tolerance of ambiguity (which basically refers to the ability to accept contradictory or unexpected evidence of something while keeping an open mind) and fear of failure (which can lead to pushy, goal-dominated behaviour but, in fact, is the opposite of need for achievement. The anxiety caused by the fear can sometimes be strong enough to cause the individual to deliberately bring about the failure that is feared). Low fear of failure means that the entrepreneur is prepared to risk things going wrong and can handle setbacks without being deterred. High achievement motivation is a great driving force but low fear of failure may be very useful in times of business chaos and uncertainty.

Entrepreneurial work style

The need for supportive, open and communicative policies, structures and cultures in effective entrepreneurial firms as the optimal crucible for successful innovations comes through very strongly from studies of innovation and successful entrepreneurship. However, the strong internal locus of control of successful entrepreneurs suggests there may be a difficulty in accepting the influence of others, powerful or not. And, the strong need for autonomy does not suggest a personality open to sharing of ideas or knowledge. Indeed, the popular image of a successful entrepreneur can sometimes be that of a determined autocrat who lets nothing stand in the way of success. How can these two conflicting pictures of successful entrepreneurship be reconciled? The answer is that, just as there is no one ‘entrepreneurial personality’ and people have different styles of learning, so too are there different management and leadership styles that vary between particular entrepreneurs, in their particular firms facing their own particular set of circumstances.


In looking ahead to the launch of a successful entrepreneurial idea, we have already highlighted the importance of social process in innovation so it is important to avoid getting too fixated only on the role and capabilities of the entrepreneur. It is the overall capacityof firms, real and perceived, rather than just the individual abilities of their owners, managers or employees that determine the scope of their activities. Perceptions of their own and their staff's capabilities plus their perceptions of competitors’ capabilities has an important part to play in determining small firm owners’ expectations of success. However, there are also likely to be cultural factors of a more general nature which influence perceptions of desired abilities, resources and skills. Entrepreneurs may well be able to identify crucial skills and tasks more accurately than other small business managers. Entrepreneurs can also be defined in terms of their ability to perceive and to respond to these changes more quickly than other business managers. With reasonable feedback, it is relatively straightforward to discuss opportunities and to identify the gaps between reality and perception. However, customer and consumer needs are often ill defined, hidden from view and difficult to quantify Certainly, the perception of many lower level needs (either the needs of entrepreneurs or of customers) are even more strongly determined socially through broad cultural or more immediate occupational influences.

It seems reasonable to hold that effective business judgement reflects the correspondence of an individual's perceived capacities, opportunities and threats to their objective possibilities and the individual's ability competence) to act upon that information. It is not too difficult to then interpret the list of common entrepreneurial behavioural characteristics in Table 2, in terms of business competence. The successful entrepreneurial firm needs the right balance of competences in the team as a whole rather than seeking them in a single individual. Modern management theory is certainly moving in this direction and away from older hierarchical, scientific management or management-by-objectives models. In reality, your leadership and management styles will be determined by what you feel most comfortable with and what you feel is the norm in the circumstances (but remember that the people you are dealing with also have their feelings about what is a ‘normal’ management or communications style for the circumstances). By now we shall assume that you have worked out many of these issues to your own satisfaction but, if you need more help, the following activity on teamwork issues may help you consider them more systematically.

Key points

The important points this unit has covered include:

• Defining the entrepreneur in terms of economic function and role.
• Identifying the key characteristics of successful entrepreneurs and entrepreneurial firms.
• Considering the role of entrepreneurial motivation in decision making and business behaviour.
• Identifying leadership and management styles appropriate to an entrepreneurial firm
• Considering the entrepreneurial team needed to support your idea.

Now Read

1. Entrepreneurship innovation, (video and transcript), by Diane Amanti, MIT.
2. Definitions, Chapter 1 of Commercialisation and Entrepreneurship: Technology, Business and People

Forum Discussion Questions

1. Characteristics of successful innovation:  Report the answers you gave in Activity 1 on the cand discuss with other students: Referring to the characteristics of successful innovation, complete the Characteristics of the entrepreneurial firm checklist.

Consider the ideal firm for bringing your idea to market (or if your ideas have not yet crystallised, an enterprising group or firm of at least two other people you know). Make a note about the purpose of the firm or team before you answer the questions.
Try to answer the following questions (pausing for reflection if you need to.) If the answer is ‘Yes’ write a brief example. If the answer is ‘No’, write the main reason.

Entrepreneurial qualities: Report the answers you gave in Activity 2 on entrepreneurial qualities and discuss with the other students:

• How many of the entrepreneurial qualities listed in Table 2 do you feel already, in the main part, apply to you?
• Which ones do you feel a need to find out more about?
• Which ones have you already identified as needing more development?

Acknowledgements

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License. It is a derivative of "Entrepreneurial behaviour", The Open University (2013).