Description
Introduction Context, Issues And Case Study Selection
Introduction: Context, issues
and case study selection
Contents
1.1 Entrepreneurship is a hot topic
1.2 Entrepreneurship as a field of study
1.3 Growth in enterprise education and the need for a text
and case study collection
1.4 The organising framework
1.5 Learning issues
1.6 Looking forward
Discussion questions
Recommended further reading
Chapter 1
Chapter 1 Introduction: Context, issues and case study selection
2
Entrepreneurship in action 1.1
Sir Stelios Haji-Ioannou and easyJet
EasyJet Airline Company Limited (referred to as
easyJet) is a British airline headquartered in London
Luton Airport. At 6.50 on 10 November 1995 easyJet’s
first flight took off from Luton in England to Glasgow
in Scotland. Incorporated earlier during the same year
by Stelios Haji-Ioannou, easyJet began operations by
taking customer bookings through its telephone
reservation centre at easyLand (i.e., home of easyJet
at London Luton airport), prior to the business going
virtual in 1998. Stelios wanted to provide low-cost
scheduled air travel on short haul routes within
Europe. He supported his venture with the
advertisement that stated, ‘making flying as affordable
as a pair of jeans – £29 one way’. Stelios encouraged
airline passengers to ‘cut out the travel agent’. On
5 November 2000 easyJet was floated on the London
Stock Exchange. Today his dream has materialised
into a pan-European airline with links to 100 airports
in a network which flew 50 million seats in 2008,
reporting £2,363 million and £123 million in sales
revenue and pre-tax profit, respectively. EasyJet has
20 bases throughout Europe and the hub is London
Gatwick. In 2009, easyJet carried 45.2 million
passengers and behind Ryanair the company is
the second-largest low-cost carrier in Europe.
Born on 14 February 1967 to Greek Cypriot
shipping tycoon Loucas Haji-Ioannou and Nedi
Haji-Ioannou, Stelios was the second of three
children. He grew up amongst the privately-owned
fleet of ships witnessing his entrepreneurial father
dominate the global shipping industry for the latter
half of the twentieth century. After finishing his
secondary education at Doukas High School in
Athens, Greece, Stelios moved to London in 1984 to
continue his undergraduate education at the London
School of Economics. In London, he then pursued
an MSc in Shipping, Trade and Finance from Cass
Business School. Due to his entrepreneurial success
Stelios has subsequently been awarded a total of
four honorary doctorates from Liverpool John
Moores University, Cass Business School, Newcastle
Business School and Cranfield University, and he
was awarded a knighthood.
After a short stint working in his father’s
shipping company, Troodos Shipping Co. Ltd, Stelios
successfully negotiated a $30 million payout from
his father to fund his own shipping company called
Stelmar Shipping. Contrary to popular belief, this
was his maiden entrepreneurial expedition. In 2001,
he floated Stelmar on the New York Stock Exchange.
Stelios sold the company in 2005 to the rival OSG
shipping group for $1.3 billion, which generated
tremendous personal wealth for Stelios.
Stelios admired his father’s success but was
determined to be independent. Modestly apologetic
about his wealthy upbringing Stelios asserted:
‘I always respect self-made people more than rich boys
like me. I cheated because I got money from my father.
Then again, when you’re 28 and you want to start an
airline; and your last name’s unpronounceable venture
capitalists aren’t going to give you any money!’
Although Stelios went on to create a number of
other businesses, many of them linked to travel,
easyJet is his most successful endeavour. While
Stelmar proved the credibility of Stelios as an
entrepreneur, easyJet has confirmed his ability as
a habitual entrepreneur (i.e., creating multiple
businesses).
Source:http://en.wikipedia.org/wiki/Stelios_Haji-Ioannou;
www.easy.com; and various.
Learning objectives
? To explain why entrepreneurship is an important (‘hot’) topic.
? To identify the main themes in studying entrepreneurship and how these are used
to structure this book.
? To identify the main learning issues that the book will focus upon.
1.1 Entrepreneurship is a hot topic
3
1.1 Entrepreneurship is a hot topic
The experience of Sir Stelios Haji-Ioannou and easyJet in Entrepreneurship in action 1.1
provides a graphic illustration of the impact that entrepreneurs can make in creating a
new venture that helped change fundamentally the rules of the game in the airline market.
But entrepreneurship takes a variety of forms and appears in both small and large firms,
in new firms and established family firms, in the formal and informal economy, in legal
and illegal activities, in innovative and more conventional concerns and in all regions and
economic sub-sectors (Organisation for Economic Co-Operation and Development
(OECD), 1998: 35). Entrepreneurial events, such as the formation and development of
businesses to pursue an opportunity, attract interest from policy-makers and practitioners
(Department of Trade and Industry (DTI), 2004). The entrepreneurial function is widely
viewed as a vital component in the process of economic growth (Baumol, 1968). The
OECD (1998: 12) asserted:
Entrepreneurship is central to the functioning of market economies. Entrepreneurs are agents
of change and growth in a market economy and they can act to accelerate the generation, dis-
semination and application of innovative ideas. In doing so, they not only ensure that efficient
use is made of resources, but also expand the boundaries of economic activity. Entrepreneurs
not only seek out and identify potentially profitable economic opportunities but are also willing
to take risks to see if their hunches are right. While not all entrepreneurs succeed, a country
with a lot of entrepreneurial activity is likely to be constantly generating new or improved prod-
ucts and services.
Policy-makers and practitioners are seeking to promote the supply of entrepreneurs in
order to encourage economic benefits such as wealth creation, job generation and compe-
tition as well as social benefits (i.e., choice and opportunity for under-represented groups
in enterprise societies such as women, young people, ethnic minorities, etc.). Promoting
entrepreneurship is part of a formula aimed at reconciling economic success with social
cohesion (OECD, 1998).
Small and medium-sized enterprises (SMEs) account for the vast majority of businesses
in most countries. Yet only a small proportion of new firms enter a high growth trajectory
like easyJet, providing a substantial contribution to jobs and sales (Storey, 1994). Entrepre-
neurs establish new and smaller firms for a variety of reasons, and not solely to satisfy the
goals of policy-makers (see Case 1, IPS Communication – Distribution: Claude Guinet’s
career in entrepreneurship). Notably, entrepreneurs may want to maintain independence
and control (Birley and Westhead, 1994). Some entrepreneurs may focus on lifestyle objec-
tives rather than profit making, professional management and job generation (Westhead
and Howorth, 2007).
Attention should, therefore, be directed towards a greater appreciation of the
attitudinal, resource, operational and strategic barriers to business formation and
development, as well as the resources and strategies selected by different types of
entrepreneurs to grow their ventures (Westhead, 1995). The economic outputs
(e.g., prices, competition, innovation, job generation, wealth creation, balance of
payments, etc.) made by different types of entrepreneurs and organisations need to be
understood.
Chapter 1 Introduction: Context, issues and case study selection
4
1.2 Entrepreneurship as a field of study
The entrepreneurial process involving all the functions, activities, and actions associated
with the perception of opportunities, and the creation of organisations to pursue them
(Bygrave and Hofer, 1991) has generated considerable academic interest. There is no agreed
definition of entrepreneurship. Further, there is concern over what entrepreneurship con-
stitutes as a field of study (Gartner, 2001; Busenitz et al., 2003). In order to promote the
study of entrepreneurship, academics have utilised a wide variety of definitions. It is, how-
ever, widely recognised that entrepreneurship involves the creation of new businesses and
the development of new and established firms.
To encourage the advancement and propagation of knowledge in the field of entrepre-
neurship (Low and MacMillan, 1988), Ucbasaran et al. (2001) have emphasised the need to
consider the contextual and process issues associated with entrepreneurship. The context of
the entrepreneurial phenomenon can be discussed not only in terms of the creation of new
independent firms, but also in terms of corporate ventures, management buyouts and
buyins, social enterprises, and the inheritance and development of family firms. Studies
have revealed that entrepreneurs are not a homogeneous entity and different types of en-
trepreneurs exist (Woo et al., 1991; Chapters 5 and 6 of this book). Sir Stelios Haji-Ioannou
represents a good example of a habitual entrepreneur who has created many businesses
(see Chapter 5). The processes associated with the entrepreneurial phenomenon can be
discussed with regard to opportunity recognition and exploitation by entrepreneurs; ability
based on skills, competencies and knowledge; and ability to obtain resources and co-
ordinate scarce resources (Shane and Venkataraman, 2000).
There has been concern that entrepreneurship is a fragmented field (Ucbasaran et al.,
2001; Schildt et al., 2006), and this fragmentation may hinder scholarly development and
legitimisation of the field. However, there is evidence of maturity and convergence in entre-
preneurship as a set of codified theories, models, methods, and measures that direct the
research agenda emerge (Grégoire et al., 2006). With reference to the citation patterns of
entrepreneurship articles published in the years 2000 to 2004, Schildt et al. (2006) detected
that the ten most frequently cited themes relate to:
? societal consequences of entrepreneurship (see Chapter 2);
? conceptualisation of the entrepreneurial process (see Chapter 3);
? alertness, opportunity creation and creative destruction (see Chapter 3);
? psychological characteristics of entrepreneurs (see Chapter 4);
? entrepreneurial networks and resource accumulation (see Chapters 3, 5, 6 and 10);
? corporate entrepreneurship and venturing (see Chapter 8);
? born-global firms (see Chapter 13); and
? entrepreneurial firm survival and growth (see Chapters 13 and 14).
The following themes have also attracted considerable attention:
? risk-taking among entrepreneurs (see Chapter 3);
? organisational (entrepreneur) learning and problem-solving (see Chapter 5);
? trust and relational capital (see Chapter 5);
? leadership and management teams (see Chapters 6, 7, 8 and 9);
1.3 Growth in enterprise education and the need for a text and case study collection
5
? organisational decision-making (see Chapter 6, 7, 8, 9 and 14);
? knowledge-based view of the firm (see Chapter 6);
? high-technology entrepreneurship (see Chapter 6);
? environmental determinants of entrepreneurial success (see Chapter 11);
? institutions and institutional entrepreneurship (see Chapters 6, 11 and 12).
Chapters in this text key into established and emerging dominant themes within the field of
entrepreneurship, which are being explored using a variety of theoretical and methodolog-
ical lenses (Busenitz et al., 2003; Gartner et al., 2006). Markedly different lists of key articles
and scholars in the field of entrepreneurship have, however, recently been presented
(Cornelius et al., 2006; Reader and Watkins, 2006).
1.3 Growth in enterprise education and the need for a text
and case study collection
Recognition that entrepreneurship is the oxygen that ensures national, local and economic
development as well as facilitating social cohesion linked to personal choice and empower-
ment for disadvantaged members of society (OECD, 1998; DTI, 2004), has led to a massive
growth in entrepreneurship teaching (Gormon et al., 1997). In the United Kingdom, for
example, this has been aided by funding through the Department of Trade and Industry’s
Science Enterprise Challenge Fund Centres, which has encouraged more engineering and
science students to consider business ownership as a career option. The Lambert Review
(2003) has further emphasised that science and technology students need to accumulate
entrepreneurial skills. Arts students in the United Kingdom are also being encouraged to
accumulate entrepreneurial skills to enter creative industries (Department for Culture,
Media and Sport (DCMS), 2006) (see the example of Kylie Minogue the diva and entrepre-
neur in Entrepreneurship in action 1.2). Throughout Europe, the European Commission is
seeking to facilitate the ‘fostering of entrepreneurial mindsets’ throughout society
(European Union, 2000; Hannon, 2007).
Why entrepreneurship should be seen as different from other subjects is quite baf-
fling. Yet, there is debate on whether students can be taught how to become entrepre-
neurs (Fiet, 2000). Evaluation is difficult because there is a lack of clarity about what is
meant by an enterprise culture (Della-Giusta and King, 2006), and the definition of the
skills required for enterprise. Jack and Anderson (2001) suggest that teaching entrepre-
neurship is difficult because the entrepreneurial process (i.e., imagination, creativity,
innovativeness, creating and/or identifying resources, assembling and managing
resources, etc.) involves both an ‘art’ (i.e., the creative and innovative attributes) and a
‘science’ (i.e., functional skills of business and management). Numerous business and
management schools worldwide (Solomon, 2007) now deliver an array of entrepreneur-
ship and small business modules at various levels. There is growing appreciation that
even more institutions should provide entrepreneurship and small business modules.
Programmes are now being designed for non-business students (i.e., arts, media,
design, science and engineering students). Evidence from the United States suggests that
Chapter 1 Introduction: Context, issues and case study selection
6
there is still a demand for ‘business plan’/‘new venture plan’ modules that require
evidence to guide:
teaching the nuts and bolts of entrepreneurship and small business management (Solomon,
2007: 179).
There is, however, a growing need to craft courses and programmes that meet the
rigours of academia, while keeping a reality-based focus and entrepreneurial climate in the
learning experience environment.
A common element of most entrepreneurship and small business management modules
is the exploration of case studies to illustrate how problems and opportunities are
addressed by real entrepreneurs. Case studies can illustrate the ‘art’ (i.e., the creativity,
Entrepreneurship in action 1.2
So Lucky: Kylie Minogue the diva and entrepreneur
It’s rare to get a glimpse inside the world of a
celebrity’s actual business empire, which is what
makes a story from British newspaper Mail on
Sunday about the financial world of Kylie Minogue
so interesting.
The paper obtained the financial accounts of
Kylie’s company Darenote Limited from Britain’s fi-
nancial reporting regular, Companies House. They
show the business empire of the pop princess made
a profit of $6.8 million in the 12 months to April
2009, up sharply from the $2.1 million it made the
previous corresponding period.
According to the report, the accounts (signed off
by Kylie’s accountant father Ron Minogue) show a
dividend of almost $2 million was paid from
Darenote to Kylie herself. For someone who had her
first hit more than 20 years ago, the Darenote profit
really highlights the singer’s impressive longevity
and remarkable earnings power.
But look closely at the way Kylie has structured
her business affairs and you can see some lessons
that all entrepreneurs can use:
? Concentrate on high margin jobs. It’s worth
noting that as with most performers, Minogue’s
earnings are drawn mostly from the old-fashioned
source of long, hard tours – mainly due to the fact
that she gets to keep so much more of the revenue
generated by ticket sales as opposed to album
sales. Indeed, albums increasingly act as loss-
leaders for many artists, particularly those who
can draw huge crowds like Kylie.
? Premium pays. In late 2009 (during the period cov-
ered by the Darenote accounts) Kylie appeared at
a special concert to open a hotel in Dubai. VIP or
private appearances attract huge dollars for
artists – all of which shows that exclusivity does
have a real value.
? Diversify. The problem for many celebrities is that
earnings can be so up and down. To smooth this
out, artists such as Kylie extend their brands into
other areas. Minogue’s endorsements include
homewares, perfume (for women and men),
books and clothing.
? Tap into new markets. Minogue has been brilliant
at constantly finding new markets – just look at
the way she still attracts customers who loved
her as an actor, 1980s music star, pop diva, gay
icon and fashion icon. She’s also continued to
look to expand geographically. The Dubai hotel
show was her first in the Middle East, while she
launched her first major US tour in late 2009.
Source: J. Thomson, SmartCompany, Entrepreneur Watch,
15 March 2010.
1.3 Growth in enterprise education and the need for a text and case study collection
7
imagination, innovativeness and problem-solving skills) (Lumsdaine and Binks, 2003)
and ‘science’ (i.e., strategy, planning, marketing, financial, project management, time
management, leadership, motivation, delegation, communication and negotiation skills)
(Westhead and Matlay, 2006; Wickham, 2006) skills and capabilities that have to be
accumulated and leveraged by entrepreneurs.
Numerous practical, theoretical and policy books are available relating to entrepreneur-
ship and small business developmental issues (Storey, 1994; President and Fellows of
Harvard College, 1999; Bolton and Thompson, 2000; Bridge et al., 2003; Kirby, 2003; Lums-
daine and Binks, 2003; Kuratko and Hodgetts, 2004; Carter and Jones-Evans, 2006; Deakins
and Freel, 2006; Wickham, 2006; Burns, 2007; Storey and Greene, 2010). Most books gener-
ally focus on small business issues, or solely discuss how to establish a new business. A dis-
tinction can be made between practically orientated books as opposed to theoretical and
policy orientated books. Both streams of textbooks seek to illustrate key issues with regard
to very brief case study examples. In many instances, the case studies appear as an after-
thought to illustrate how theoretical or practical issues are actually exhibited by real entre-
preneurs and businesses.
This text and case study collection is designed to meet the need for an accessible re-
source that will stimulate critical thinking and reflective learning relating to issues gener-
ally abstractly (and briefly) discussed in lectures. In addition, it will be useful in seminars
focusing on key issues that need to be considered with regard to an idea and/or a business
plan module, as well as theory or policy orientated entrepreneurship and small business
modules. Our aim is to provide undergraduate and postgraduate students, as well as aca-
demics, policy-makers and practitioners, with deeper insights into the entrepreneurial
and wealth-creating processes, as well as the processes relating to small business develop-
ment. Case studies are linked to clear learning outcomes that are stated prior to the pres-
entation of each case study. A separate teaching note solely available to module
convenors and tutors will guide students through the issues that need to be considered.
Students are encouraged to read one or more of the longer cases for each chapter, pre-
sented at the end of the book. Some cases relate to more than one theme. The 25 longer
cases are listed in Table 1.1.
We do not provide an exhaustive review of all themes in the field of entrepreneurship
and small business development, or a detailed discussion of all tools that can be used to
generate and exploit business opportunities. This textbook provides contextual evi-
dence relating to the actual behaviour of real entrepreneurs and organisations, like Sir
Stelios Haji-Ioannou and easyJet, and it complements materials available elsewhere.
Articles included within the Carter and Jones-Evans (2006) edited edition, for example,
cover many important themes and illustrate patterns and behaviour with regard to
entrepreneurs and their organisations. Several edited volumes of general readings also
focus upon entrepreneurship and small business development (Casson, 1990; Acs, 1996;
Birley, 1998; Storey, 2000; Westhead and Wright, 2000; Hitt and Ireland, 2005; Casson
et al., 2006; Cuervo et al., 2008; Storey and Greene, 2010), as do readings relating to new
firm formation (Davidsson, 2006a), technological entrepreneurship (Siegel, 2006),
management buyouts (Wright and Bruining, 2008), family firms (Poutziouris et al.,
2006), female entrepreneurship (Brush et al., 2006) and international entrepreneurship
(Dana, 2004).
Chapter 1 Introduction: Context, issues and case study selection
8
Table 1.1 Case studies and linkage to chapters
Case title Author(s) Chapter Secondary
link chapter links
1 IPS Communication – Distribution: Claude Guinet’s
career in entrepreneurship
Joëlle Piffault and Louis
J. Filion
1 3, 4, 5, 7
2 Fickle Rooster Productions: Turning a hobby
into a profitable business
Kirk Frith 2 3
3 The Recording Room: Ben Wallace’s musical ventures Ed McMullan 3 2
4 Portable Patient Lifts, LLC: Patent and start-up issues Gerard M. Campbell 3 2, 6, 12
5 Original Voddy Company Limited Andy Corcoran 3 12, 13
6 Alba Adventures: An entrepreneur pushed
into entrepreneurship
Marlene Mints Reed 4 10, 11, 12
7 Ace Cleaning (UK) Limited: Development of
a purchased firm by a novice entrepreneur
Mark Freel 4 2, 9, 11, 12, 14
8 The OffQuip saga: Partner entry and exit dynamics Louis J. Filion 5 14
9 Iain Russell and Arran Aromatics Limited: Portfolio
and serial entrepreneurship
Carol Craig and Frank Martin 5 3, 4, 11, 13, 14
10 Marine Products Limited: Confronting barriers
to innovation
Povl Larsen and Alan Lewis 6 2, 12
11 Deep Sea Fishing Inc: Acquiring the ‘right’ capital
for a new technology-based firm
Alf Steinar Saetre and Truls
Erikson
6 12
12 Painatolo Ltd and Rakennuspalvelu Ltd: Family
business transfer issues
Ulla Hytti, Kirsi Lamminpää
and Pekka Stenholm
7 2
13 Spin-offs at Tremcar: Partnerships for growth Caroline Mireault, Danielle Luc
and Louis J. Filion
8 14
14 Wemas International Limited: Purchase and
turnaround of an existing business by Brent Lybbert
Ed McMullan 9 3, 12
15 Seagate Technology Mike Wright and Angela Loihl 9 12, 14
16 Hill Holt Wood: Community-owned social enterprise Kirk Frith and Gerard McElwee 10 11, 14
17 Rad-Amer Intourist: American entrepreneur
opportunity recognition and exploitation in Moscow
Zafar U. Ahmed, Peter Robinson
and Leo Paul Dana
11 3
18 The Fleet Sheet: New firm creation in a transition
economy
Marlene Mints Reed 11 2
19 BCH TeleCommunications Marlene Mints Reed 11 2, 3
20 UFO Pictures: The challenges of film production Marlene Mints Reed 12 2, 11
21 New Covent Garden Soup Company: Contributions
made by venture capitalists
Mike Wright 12 14
22 AAC Limited: Entrepreneurial team dynamics Eva Jaro? sová and Joan Winn 13 3, 11
23 Model Kit World: Firm growth through geographic
expansion
Alex S. L. Tsang, Wai-Sum Siu
and Gloria H. Y. Ting
13 3, 11
24 Upstart Graphics: Merger and acquisition issues Donald M. DePamphilis 14 12
25 Private family health practice: Limits to growth Suzanne Hetzel Campbell
and Christopher L. Huntley
14 2
1.4 The organising framework
9
1.4 The organising framework
Themes explored in this book illustrate developments in the field of entrepreneurship. A broad
view of entrepreneurship is operationalised. Gartner (1985) presented a conceptual framework
for describing the phenomenon of new venture creation that integrated four major perspectives
in entrepreneurship: the characteristics of the individual(s) starting the new venture; the organ-
isation they create; the environment surrounding the new venture; and the process by which the
new venture is created. Guided by these insights, the six themes within the emerging stream en-
trepreneurship studies highlighted by Ucbasaran et al. (2001) are drawn upon in the chapters
presented here. Short entrepreneurship in action vignettes and longer cases are linked to one or
more of the six themes highlighted in Figure 1.1. The themes are as follows:
? Theme 1: Theory. Cases can be linked to economic, psychological, cognitive, sociologi-
cal, and opportunity identification and exploitation theories exploring the entrepre-
neurial process and the behaviour and performance of entrepreneurs and their
organisations. Entrepreneur and/or organisation resources and behaviour are illustrated
in contrasting industrial, locational, national and cultural contexts.
? Theme 2: Types of entrepreneur are examined in terms of academic, novice, serial,
portfolio and social entrepreneurs.
? Theme 3: The process of entrepreneurship is examined in terms of opportunity creation,
recognition, information search and learning, and resource acquisition and leverage as
well as the competitive strategies selected by entrepreneurs. Methods of best entrepreneur
and business practice are illustrated.
Theme 6
Outcomes
• entrepreneur and
organisation performance
and growth
• venture exit
Learning
Theme 1
Theoretical
antecedents
Theme 2
Type of entrepreneur
• nascent
• novice
• serial
• portfolio
Theme 3
Process
• opportunity recognition
and information search
• resource acquisition
and business strategies
Theme 4
Type of organisation
• start-ups
• corporate venturing
• MBOs/MBIs
• franchising
• inheritance
Theme 5 External environment
Figure 1.1 The focus of entrepreneurship research
Source: Ucbasaran et al. (2001, Figure 1:59).
Chapter 1 Introduction: Context, issues and case study selection
10
? Theme 4: Organisational types. Organisational modes selected by entrepreneurs are
examined, including family firms, corporate entrepreneurship, management buyouts
and social enterprises.
? Theme 5: The external environment for entrepreneurship. Governments in developed
and developing economies have introduced policies to address attitudinal, resource, op-
erational and strategic barriers to business formation and development. The merits and
disadvantages of targeted and customised support to entrepreneurs and firms are being
considered by practitioners. Case studies from the United Kingdom and United States
are presented as well as other institutional contexts such as emerging economies.
? Theme 6: Outcomes of entrepreneurial endeavours. The economic and non-economic
outcomes of entrepreneurial endeavours are illustrated with reference to the entrepre-
neur and firm units of analysis. The issue of entrepreneurial learning is discussed
throughout the book.
Text, short entrepreneurship in action vignettes and longer cases illustrate the dynamics of
entrepreneurs and the organisations they own. Evidence relating to the actual resources
and behaviour of different types of entrepreneurs and organisations are illustrated. We
highlight that the ‘entrepreneur’ and the ‘organisation’ should be the unit of academic and
policy analysis. We explore the behaviour of entrepreneurs and illustrate how entrepre-
neurs acquire information, how they learn from their entrepreneurial experiences, and how
they utilise acquired knowledge to develop their organisations. A distinction between dif-
ferent ‘types’ of entrepreneurs and organisations is highlighted in several national contexts.
Methods of best entrepreneur (and organisation) practice in relation to imagination, cre-
ativity and innovation as well as methods to address barriers to enterprise and business de-
velopment are raised. Several cases highlight that the entrepreneurial process can be
moderated by external environmental conditions. Outcomes associated with contrasting
enterprise and competitive strategies are illustrated.
1.5 Learning issues
This book seeks to develop an understanding of entrepreneurs and the organisations they
create, own, manage, develop and exit. It is designed to:
? provide an understanding of the nature, role and functions of different types of entre-
preneurs and organisations owned by entrepreneurs;
? examine the characteristics, attributes and resources of different types of entrepreneurs;
? demonstrate the variety of forms of entrepreneurial processes relating to new firm cre-
ation, enterprise within larger firms, business development and exit route selection;
? critically consider the array of factors associated with enterprise development;
? demonstrate the influence of external environmental conditions, including public
policy, on the entrepreneurial process;
? highlight the barriers faced by entrepreneurs and discuss methods selected by entrepre-
neurs to address identified barriers; and
? highlight practical issues that need to be considered to create, identify, evaluate, pursue
and exploit a business opportunity.
1.5 Learning issues
11
In the following chapters, text, short case study entrepreneurship in action vignettes and
longer cases are presented to highlight key issues relating to entrepreneur and organisation
behaviour. The broad purpose of each chapter and its associated cases is to enable the
reader to:
? acquire an understanding of practical and policy debates in developed and emerging
economies (i.e., Europe, North America, Scandinavia, China and Russia);
? think critically about the concepts presented in each case;
? think critically about the practical options available; and
? use the case studies to formulate and guide their individual studies for a dissertation
and/or assignments.
Each chapter will review the literature relating to the selected theme. Key issues will be
highlighted and they will be illustrated in the cases, which will ‘talk’ and exhibit people, pat-
tern and process issues.
Short entrepreneurship in action vignettes and longer cases illustrate issues that
students have to consider with regard to both the ‘art’ (i.e., the creative and innovative
attributes) and the ‘science’ (i.e., business and management functional skills) of entrepre-
neurship and small business development. Cases illustrate ‘how’ and ‘why’ entrepreneurs
and their organisations behave as they do in relation to the creation, pursuit and exploita-
tion of opportunities. Several cases highlight key practical and/or policy issues. Longer case
study authors make linkages to the current body of knowledge to emphasise issues the
reader should critically reflect upon. Specific questions are presented at the end of each case
to guide students’ critical reflection and learning.
Case study authors are drawn from several disciplines. Consequently, alternative prac-
tical lenses are exhibited in the cases to explore and critically reflect upon the actual be-
haviour of entrepreneurs and their organisations. Cases relate to a variety of industrial,
locational, national and cultural contexts. Several cases highlight that the institutional
context and the profiles of entrepreneurs shape the entrepreneurial process and business
development.
Education institutions throughout the world are encouraging Science, Engineering,
Media, Art and Design students to participate in entrepreneurship and small business
management modules. Selected cases will interest students drawn from a variety of disci-
plines. The cases explore and illustrate business formation and development issues relat-
ing to traditional industries as well as the increasingly important creative, knowledge and
technology-based industries. Notably, the cases illustrate the judgements and behaviour
of actual entrepreneurs. Further, the cases illustrate the dynamics of entrepreneurs and
the organisations they own. Cases illustrate how entrepreneurs acquire information, how
they learn from their entrepreneurial experiences, and how they utilise acquired knowl-
edge to develop their organisations. The following important and novel themes are
raised in the cases:
? The ways in which entrepreneurs’ attitudes and human capital resources (i.e., spe-
cific human capital relating to industry know-how, management know-how, and
entrepreneurial capabilities, etc.) can shape the business start-up process and subse-
quent firm development. Issues relating to the supply of entrepreneurs are, there-
fore, discussed.
Chapter 1 Introduction: Context, issues and case study selection
12
? The cases illustrate several dimensions of the entrepreneurial process relating to imagina-
tion, creativity and innovation as well as issues relating to information search, opportu-
nity identification, evaluation and pursuit. The increasing importance of international
business is also highlighted in several cases.
? Obstacles faced by particular types of entrepreneurs (i.e., young and inexperienced en-
trepreneurs, owners of knowledge-based firms and family firms, social entrepreneurs, as
well as female entrepreneurs and experienced portfolio and serial entrepreneurs) are
illustrated.
? Resource assemblage and leverage issues to exploit an opportunity are explored. The
need for teams of entrepreneurs with diverse human capital profiles is highlighted. In
addition, the methods used by entrepreneurs to circumvent attitudinal, resource,
operational and strategic barriers to firm formation and development are shown. The
assets and liabilities associated with solo entrepreneurship as well as team entrepre-
neurship are highlighted. Further, the accumulation and leverage of social capital (i.e.,
networking) to address barriers to innovation and firm formation and development is
illustrated.
? Issues relating to corporate entrepreneurship within existing larger organisations are
raised. The academic entrepreneurship context is discussed.
? The emerging theme of social entrepreneurship is illustrated.
? The external environment for entrepreneurship is considered throughout the book as
a moderator that can impact on the behaviour of entrepreneurs and organisations.
Cases relate to several national and industrial contexts (i.e., traditional, knowledge
and technology-based, creative industries, etc.). The role played by public policy (i.e.,
provision of grants and advice, education and training) shaping the entrepreneurial
process is described.
? Outcomes associated with entrepreneurial endeavours are highlighted. Financial and
non-financial issues are explored. As entrepreneurship is not a single action event, with
some entrepreneurs having careers in entrepreneurship, the habitual entrepreneur phe-
nomenon is illustrated. Several exit routes are open to entrepreneurs. Business transfer
issues are highlighted.
After reading the entrepreneurship in action vignettes and the cases the reader should be
able to:
? demonstrate a knowledge of issues pertaining to the role, nature and function of the
entrepreneur;
? apply various concepts to understanding the needs and contributions made by different
‘types’ of entrepreneurs and organisations;
? demonstrate a knowledge of the stimuli and obstacles (i.e., resource needs) to business
formation, purchase and development;
? demonstrate a knowledge of the tools used by entrepreneurs to generate, create, evalu-
ate, pursue and exploit business opportunities;
? demonstrate a knowledge that the external environment (i.e., institutional context) can
shape entrepreneurial processes and business development;
? demonstrate knowledge of the tools that can be applied to ensure a firm’s
competitive advantage and to address constantly emerging barriers to business
development; and
? demonstrate how entrepreneurs learn from their successes as well as their mistakes.
Recommended further reading
13
1.6 Looking forward
This chapter has highlighted that encouraging entrepreneurship (i.e., innovation, opportu-
nity identification and exploitation, new firm creation, and firm grow in domestic and in-
ternational markets) in new and established organisations can encourage economic and
non-economic benefits to society. Established and emerging themes relating to the entre-
preneurial process have been summarised. Key elements of the entrepreneurial process
were briefly discussed. A distinction between the ‘art’ and ‘science’ of entrepreneurship was
made. The content and structure of the book as well as key learning issues were also dis-
cussed. Chapter 2 explores in more detail the economic and non-economic contributions
of entrepreneurial firms. Barriers to new private firm formation and business development
are summarised. The case for intervention to address barriers (i.e., market failures) to busi-
ness formation and development is presented. The need to focus on the entrepreneur (as
well as the firm) as the unit of analysis in academic and policy studies is raised.
Discussion questions
1 What is entrepreneurship? Discuss the elements of the entrepreneurial process.
2 What are the key elements of the ‘art’ and ‘science’ of entrepreneurship?
3 Why is entrepreneurship important for society?
4 Why do governments in both developed and developing countries attach an
importance to promoting enterprise?
Recommended further reading
Gartner, W. B. (2001). Is There an Elephant in Entrepreneurship? Blind Assumptions in Theory
Development. Entrepreneurship Theory and Practice, 25 (4): 27–39.
Gartner, W. B., Davidsson, P. and Zahra, S. A. (2006). Are You Talking to Me? The Nature of
Community in Entrepreneurship Scholarship. Entrepreneurship Theory and Practice, 30 (3):
321–331.
Grégoire, D. A., Noël, M. X., Déry, R. and Béchard, J-P. (2006). Is There Conceptual Convergence
in Entrepreneurship Research?: A Co-Citation Analysis of Frontiers of Entrepreneurship
Research, 1981–2004. Entrepreneurship Theory and Practice, 30 (3): 333–373.
Schildt, H. A., Zahra, S. A. and Sillanpää, A. (2006). Scholarly Communities in
Entrepreneurship Research: A Co-Citation Analysis. Entrepreneurship Theory and Practice,
30 (3): 399–415.
Ucbasaran, D., Westhead, P. and Wright, M. (2001). The Focus of Entrepreneurial Research:
Contextual and Process Issues. Entrepreneurship Theory and Practice, 25 (4): 57–80.
Contents
2.1 The positive contributions of entrepreneurial firms
2.2 Challenges of entrepreneurial firms
2.2.1 Reluctance or inability of most new and small firms to grow
2.2.2 Differences between smaller and larger enterprises
2.2.3 Barriers to new and small firm growth
2.3 Policy to support enterprise
2.3.1 Context
2.3.2 Intervention to address barriers (and market failures) to new
and small firm growth
2.3.3 Scepticism surrounding policy towards new and small firms
2.3.4 Need to monitor intervention and issues with blanket support
2.3.5 The entrepreneur as the unit of academic and policy analysis
2.4 Looking forward
Discussion questions
Recommended further reading
Chapter 2
Contributions of entrepreneurial firms
2.1 The positive contributions of entrepreneurial firms
15
Learning objectives
? Highlight differences between smaller and larger enterprises and barriers to
enterprise.
? Discuss diverse economic and social contributions made by entrepreneurs, new
firms and growing firms.
? Analyse issues relating to job generation, wealth creation, job generation,
competitiveness and innovation, as well as reduction of social and regional
inequality.
? Consider the case for intervention to support enterprise.
? Analyse the case made for the entrepreneur and the firm to be units of academic
and policy attention.
? Discuss the case for ‘targeted’ support.
2.1 The positive contributions of entrepreneurial firms
Debate surrounds the economic and non-economic contributions made by entrepreneurs,
new firms and a growing stock of entrepreneurial firms (Acs and Storey, 2004; Johnson,
2007). These contributions are summarised in Table 2.1. Entrepreneurial firms are impor-
tant because they can make several economic and non-economic contributions. They play
a role in encouraging economic development (Baumol, 1968; Carree et al., 2007). Entrepre-
neurial firms have a role in reducing unemployment and poverty (Storey, 1982). They are
major creators of new jobs when large firms are downsizing (Birch, 1979), irrespective of
the economic cycle (DTI, 2004). Entrepreneurial firms generate wealth creation and the
firm, entrepreneur(s) and employees can be taxed. Government can reinvest this taxation
into economic development projects (i.e., enterprise and small firms policy and/or other
social projects). Entrepreneurial firms are seen as the seeds from which large successful
organisations grow (i.e., Microsoft, Cisco Systems, Body Shop, etc.).
Entrepreneurial firms stimulate competition, which limits the ability of dominant firms
to raise prices. Competition can lead to a reduction in prices, more consumer choice,
encourage the creation and dissemination of new innovative products/services and/or
better quality products and services. Moreover, competition encourages more efficient use
of resources and the displacement of non-viable inefficient businesses:
If incumbent businesses are unable to match the productivity of new or fast growing small busi-
nesses, then they are either forced to exit the market or their market share is reduced, so increasing
the productivity of the market as a whole (DTI, 2004: 17).
Viable businesses that are more efficient users of resources will be associated with superior
levels of productivity, which can enable them to sustain competitive advantage in local and
international markets. Efficient entrepreneurial firms that can internationalise can create
jobs and wealth. Internationalising firms are also less likely to displace new and established
firms in local markets. Efficient firms can reduce the flow of imports, and they can play a
role in reducing balance of payments deficits.
Chapter 2 Contributions of entrepreneurial firms
16
Table 2.1 Entrepreneurial firms: Positive economic and non-economic contributions and negative
barriers to enterprise
Positive contributions Negative barriers
Economic
• Economic development
• Reduction of unemployment and poverty
• Job generation when large firms are downsizing,
irrespective of economic cycle
• Wealth creation
• Taxes (firm, entrepreneur and employees) and this tax
income can support the economic, social and political
agendas of government
• Entrepreneurial ‘seed’ firms can grow into large ‘oaks’
firms
• Competitiveness (i.e., reduction of power of large firms,
lower prices, better quality products/services,
consumer choice, better utilisation of scarce resources,
displacement of inefficient firms, etc.)
• Productivity
• Large firm competitiveness enhanced by
entrepreneurial firms involved in the supply-chain
• Internationalisation, reduction of flow of imports and
balance of payments deficits
• Radical and incremental innovation, technology; creation
of new industries and markets; competitive advantage
not solely related to ‘sweating low cost labour’
• Service role – provision of essential consumer services
for ‘quality of life’
• Harmonious working environment with fewer industrial
disputes and lower absenteeism
• Seedbed role promoting the next generation of
entrepreneurs
• Protection and promotion of local communities
• Local economic development in inner cities, former
coal, fishing, mining and steel communities and
peripheral rural communities
• Multipliers – direct and indirect job generation and
wealth creation generated by new clusters of
entrepreneurial firms
Non-economic
• Reduction of social and regional inequality with regard
to access to wealth creation
• Under-represented groups (i.e., disabled, ethnic
minorities, graduates, women, young people, etc.) to
select careers in enterprise
• Empowerment (i.e., independence, control, satisfaction,
fulfil family and household responsibilities, etc.)
• Votes – policy-makers supporting enterprise are
re-elected
Macro-economic
Business and personal taxation, interest rates, exchange
rates, public spending, inflation policy, regulatory
framework
Cultural barriers and narrow education base
Advantages of large firms
Attitudinal barriers
Reluctance to select a career in enterprise; establish a
firm for independence, and/or lifestyle reasons,
reluctance to move outside the ‘management comfort
zone’; desire for a ‘born small stay small firm’, reluctance
to sell equity to ‘outsiders’ and to use ‘external’
professional advice, etc.
Resource barriers
Information, finance, premises, skilled labour, machinery,
equipment, etc.
Operational barriers
Imagination, creativity, innovation (radical or incremental),
legitimacy, appropriate administrative, management and
production systems, inability to protect the product/
service/brand, skills and capabilities deficiencies, etc.
Strategic barriers
Focus on low price strategy rather than a premium
price strategy, inability to introduce market and/or
technological differentiation, inability due to attitudinal
and resource deficiencies to create new source(s) of
competitive advantage, and/or to proactively adapt to
constantly changing market, technological and regulatory
conditions, etc.
Government failure
Government supports firms that do not require assistance
and this assistance does not generate positive
externalities
Entrepreneurial firms have a key role in introducing new product and process innova-
tions. Some firms play a niche role providing something marginally different. Entrepre-
neurs with unique scientific or technological knowledge create radical innovations that can
lead to the creation of new industries, which can promote economic development
2.2 Challenges of entrepreneurial firms
17
associated with the ‘creative destruction’ of some old industries (Schumpeter, 1934). ‘Born
global’ innovative firms can play a role in reducing balance of payments deficits (see
Chapter 13). However, only a small proportion of firms are engaged in truly innovative ac-
tivities (Storey, 1994). Many new and small firms are imitative, and they generally intro-
duce incremental innovations to sustain their competitive advantage.
Most entrepreneurial firms, especially smaller firms, are engaged in the service sector,
either servicing private consumers (i.e., catering, retail or repair) or other enterprises (i.e.,
business services). They provide an essential service role (i.e., personal and community
services) to the way of life of many people. The servicing relationship between an entrepre-
neurial firm and its customers (i.e., subcontracting) can range from co-operation to de-
pendency and exploitation. Entrepreneurial firms support the infrastructural needs of
larger firms. Many large firms would not be able to remain profitable without the service
provided by new and small firms in their supply-chain (i.e., Nissan in the north-east of
England is supplied by small firms who may solely exist to service the needs of Nissan).
Entrepreneurial firms indirectly ensure the competitiveness, profitability and contribution
to economic development made by major ‘corporate prime movers’.
Entrepreneurial firms, especially small firms, can provide a harmonious working envi-
ronment that is often reflected in fewer industrial disputes and lower absenteeism. They
can provide a nurturing role model and learning environment for potential entrepreneurs
(i.e., management, industry and finance know-how, diverse business networks, etc.). An
environment that supports individualism and reduces a dependency culture on the state
and larger firms can also reduce the power of the trade union movement.
Entrepreneurial firms are developers of the local economy. They make a contribution to
the regeneration of deprived rural as well urban communities. New and small entrepre-
neurial firms frequently service local markets. The entrepreneur(s) may live locally and feel
an allegiance to the area where the business is located. They generally employ local people
and they use local services and suppliers. This activity can generate local multiplier effects
that promote the demand for other potential new firms, which can promote a local spiral of
wealth creation and job generation to reduce local unemployment and poverty.
2.2 Challenges of entrepreneurial firms
2.2.1 Reluctance or inability of most new and small firms to grow
There are numerous barriers to enterprise (Bridge et al., 2003; DTI, 2004). Broad types of
negative barriers to enterprise are summarised in Table 2.1. The attitudes of individuals are
a major barrier to new firm creation and development. There are different types of firms
and entrepreneurs with most new firms not desiring or reporting significant growth. Most
new firms are ‘born to die young’ as most cease to trade within three years of inception
(Storey, 1994). The majority of firms that survive are ‘born small and stay small’. Many
small firms are more interested in maintaining their current level of profit than in expan-
sion. One reason for firms wishing to stay small is that the ownership and management
reside in the same person, or persons; so future firm goals are determined not only by
commercial considerations but by personal lifestyles and family factors relating to the
individuals or teams of individuals who own and manage them (see Chapter 14). However,
Chapter 2 Contributions of entrepreneurial firms
18
it seems that the proportion of small businesses that want to grow is greater than the num-
bers that actually do grow (DTI, 2004).
A distinction can be made between ‘failures’ (i.e., the high proportion of small firms that
have a short life), ‘trundlers’ (i.e., a large group of surviving small firms that remain small),
and ‘flyers’ (i.e., the small proportion of firms that have rapid growth in employment)
(Storey, 1994). Firm development may be restricted by entrepreneurs who want to main-
tain ownership and control of their firms and who may only grow their ventures to an in-
ternal ‘management comfort zone’, which allows owners to maintain control and ownership.
Storey et al. (1987) noted that 4 per cent of firms generated 50 per cent of job generation by
the firms in the sample over a decade. Similarly, Gallagher and Miller (1991) detected that
the high flyers in their sample (18 per cent of firms) accounted for 68 per cent of all jobs
created. Policy-makers concerned with job generation, wealth creation, competition, effi-
cient markets, technology diffusion and votes (i.e., re-election) (Storey, 1994) may seek to
increase the supply of entrepreneurs and entrepreneurial firms in society because each new
firm can play a valuable economic and/or social role, but they particularly want to increase
the number of high-growth ventures.
2.2.2 Differences between smaller and larger enterprises
Entrepreneurial firms can be both large and small. Many large enterprises have become so
by having been entrepreneurial and growing rapidly, and may continue to be entrepreneur-
ial through continuously investing in innovation, as well as seeking and exploiting new
opportunities (see Chapter 8). Not all smaller enterprises are entrepreneurial. Smaller pri-
vate enterprises cannot therefore be regarded as a homogeneous entity. Further, smaller
private enterprises cannot be viewed as scaled down versions of larger enterprises. Smaller
private enterprises differ in many respects from larger enterprises. Smaller private enter-
prises are associated with advantages as well as disadvantages. There are broad differences
between smaller and larger enterprises with regard to:
? firm structure,
? management and control,
? operations/production,
? resources,
? strategic planning,
? the market, and
? the business environment,
each of which are briefly discussed in turn, below.
Some smaller entrepreneurial firms are highly flexible because they have loose firm struc-
tures. Many smaller enterprises do have an organisational hierarchy, and there is a focus on
informal communication within the organisation. A loose structure can generate the fol-
lowing advantages for some smaller private enterprises:
? focus on imagination, creativity, flexibility and/or the ability to make quick decisions to
seize opportunities;
? no agency problems because ownership and management are aligned;
? easy access to the owner can generate speed and flexibility in decision-making;
? everyone involved and motivated in the organisation;
? ‘family’ unit and people are not numbers;
2.2 Challenges of entrepreneurial firms
19
? structure easy to change in response to changing external environmental conditions;
? no need for memos and time-consuming meetings; and
? accessible and friendly to outsiders, customers, suppliers, etc.
On the downside, a loose structure can generate the following disadvantages for some pri-
vate smaller enterprises:
? owners may dominate and pursue ‘family’ rather than ‘business’ interests;
? owners may exhibit diminished motivation, blind spots, denial, and/or a focus on
lifestyle issues that may retard enterprising behaviour (see Chapter 3) and firm develop-
ment (see Chapter 14);
? some owners exhibit favouritism with key positions held by ‘family’ members, and this
allocation of managerial positions based on kinship ties rather than ability can retard
firm performance;
? owners resistant to change may be reluctant to sell equity to ‘outsiders’ and to deal with
banks and financial institutions;
? owners seeking to maintain ownership and control may retard venture performance by
being resistant to external monitoring, which could improve firm performance;
? some owners have only one good business idea and they may repeat the recipe that
worked in the past in changed circumstances;
? some owners are not receptive to technological change and emerging market opportuni-
ties; and
? some owners are reluctant to consider and/or apply for external expertise required to
ensure enterprising behaviour and venture development.
The management and control of private smaller enterprises can also be associated with the
following disadvantages, which can retard continued enterprising behaviour and venture
development:
? Some smaller enterprises have a small management team (if they have one at all), and
due to the limited expertise and knowledge of management, the firm may be unable to
key into emerging profitable opportunities because there is insufficient attention given
to imagination, creativity, innovation, spotting gaps in the market, market research, fea-
sibility analysis, reluctance and/or inability to use the latest technologies, and the reluc-
tance or the inability to use ‘external’ professional support.
? In many smaller enterprises, staff have multifunctional roles and firm development can
be retarded if there are no clear lines of responsibility.
? In many smaller enterprises, the management focus on day-to-day fire fighting (produc-
tion) issues, and they do not allocate sufficient time to management thinking that
focuses on the long-term and strategic competitive advantage issues.
? Due to cost constraints and/or limited technical knowledge, some smaller enterprises
use informal systems and procedures, and there can be a reluctance and/or inability to
use more technologically sophisticated formal control tools relating to production,
cashflow, quality, etc., which can retard firm survival and development.
With regard to operations and productions issues, some smaller enterprises can seize busi-
ness opportunities that require low price product or service delivery, flexible service provi-
sion, quick speed of service or product delivery, and a focus on service or product design
and quality (see the example of Coffee#1 in Entrepreneurship in action 2.1). Flexible entre-
preneurial smaller enterprises can provide short production runs for the customers
Chapter 2 Contributions of entrepreneurial firms
20
Entrepreneurship in action 2.1
Welsh-based company Coffee#1 beats big boys to award
It was the growing coffee shop culture in shows like
Friends and Frasier that convinced him to quit invest-
ment banking for cappuccinos and muffins. Now, a
coffee chain founded 10 years ago by a Welsh
entrepreneur, has been named the best in Britain,
beating global competitors like Costa at the Café
Society Awards in London. The chain, which was
founded in Cardiff [in Wales] by James Shapland in
2000, now has 12 branches across South Wales and
South-West England. And Mr Shapland said last
night the key to the firm’s success is limiting itself to
one new shop a year. ‘As a chain, we try not to grow
too quickly or people become anonymous,’ said
Mr Shapland, who set up the business with chair-
man, David Jones, a former Microsoft director from
Bargoed [in Wales] who now lives in Seattle, a city at
the forefront of the global coffee movement. ‘This
can happen with bigger companies. Some global
chains open a new store every six to seven days,
which means they do extremely well in terms of
their profits . . . But we try to make things a little
more intimate and we try to open a shop once a year.
It’s growing but we are people who believe that our
chains, although small and local, will be recognised
with our name out there . . . The likes of Costa and
Starbucks are so powerful with their positions on
the high street and their marketing resources, that
to be able to be recognised on a simple local level is
great. What we are trying to do is offer great coffee
and produce and great service. It’s brilliant that an
independent judge has come in and recognised our
standards.’
Coffee#1 beat the likes of Costa Coffee, Caffé
Gusto, Boston Tea Party and Soho Coffee Company
to the award, which recognises its innovation, stan-
dards and customer satisfaction. It follows success
at the Beverage Service Association awards, where it
also picked up top prize.
Mr Shapland said his staff play a key role in mak-
ing the chain a success. ‘We are very lucky that we
have a sound mix of great people whom we try to
look after,’ he said. Further, ‘I think obviously the
core product needs to stand up. We spend an awful
lot of time developing a good cup of coffee and we
make sure you can taste the coffee, whereas some
competitors offer oversized cups which mean you
cannot taste the coffee . . . We want people to feel
like they have got the value out of their £2 they might
spend on coffee.’ He added: ‘We offer warm and
friendly customer service and we have an apprecia-
tion of customers and we don’t take them for
granted . . . We recognise the need to appreciate
them and try to make people feel special when they
come in – it’s easy to become too manufactured and
sterile . . . Customer loyalty is important to us. We
like to offer a nice, warm cosy environment where
you can sit on comfy sofas and read a good book or
have a chat with your friends . . . It’s easy to have a
cold feel in some of the competitors’ shops and they
can have a dirtiness to them . . . We have clean
tables and toilets. I think these factors make for a
good experience.’
The company has been growing since 2000 and
has featured in the Wales Fast Growth 50 project, an
annual search for the 50 fastest growing companies,
for three of the past four years.
Source: J. McWatt, The Western Mail, 6 March 2010.
‘ignored’ by larger enterprises. However, smaller enterprise performance can be retarded if
the enterprise is associated with one or more of the following production and operations
characteristics:
? smaller enterprises may be associated with few, if any, economies of scale;
? labour intensive rather than a focus on using modern mechanised equipment that can
generate efficiency and productivity benefits;
2.2 Challenges of entrepreneurial firms
21
? limited focus on quality control mechanisms;
? inability to take advantage of bulk buying; and
? inability to carry stocks.
Many smaller enterprises are established and managed by a ‘solo’ entrepreneur. Team
ownership of a venture is usually associated with business activities that require more
substantial human and financial resources, for example, knowledge and technology-based
activities. The human capital (i.e., management and industry know-how, technical and
entrepreneurial capabilities, ability to secure resources, prior business ownership experi-
ence, etc.) of the founding entrepreneur (see Section 4.2.2), or the entrepreneurial owner-
ship team, can shape enterprising behaviour as well as business survival and development
(Matlay and Westhead, 2005). Smaller private enterprises associated with ‘solo’ entrepre-
neurs generally have more limited pools of skills, capabilities and knowledge to draw upon
to create, spot and seize profitable business opportunities. Many smaller enterprises are
disadvantaged because they have small management teams with few or no specialists.
Many cash-strapped smaller enterprises have no or limited capacity to develop staff using
job-related formal training due to ‘ignorance’ and/or ‘market’ forces reasons (Storey and
Westhead, 1997). The inability of entrepreneurs to invest in training people in the smaller
enterprises can retard imagination, creativity and innovative behaviour as well as firm
development (Cosh et al., 1998).
New firms are generally financed by entrepreneurs who utilise their own (limited) per-
sonal savings. Smaller private enterprise survival and development can be retarded by a
lack of finance and/or poor cashflow control. Entrepreneurs with no proven track record in
business (i.e., they lack credibility) find it difficult to obtain external finance, particularly if
the entrepreneur fails to provide complete information in a business plan relating to the
risk (i.e., current and future size of the market size, current and future competitive and leg-
islative threats, etc.) and return issues that need to be considered by financiers. Entrepre-
neurs with limited collateral (i.e., a house) may be denied finance and/or charged very high
interest rates with regard to any bank finance provided. Very few smaller enterprises are
able to attract venture capital from formal venture capital firms, or even ‘business angels’,
because they have limited growth prospects. Mistakes relating to financial management
(i.e., high gearing, cashflow problems, over-trading, inability to reduce the problem of
trade bill late payment, etc.) in smaller enterprises can be expensive, and can lead to busi-
ness closure.
Strategic planning to achieve long-term competitive advantage is usually exhibited by
larger enterprises, but this is often absent in smaller enterprises. Many smaller enterprises
solely focus on low price competition alone to satisfy immediate customer demand.
Smaller enterprises are generally associated with the following features, which can retard
enterprising behaviour, firm survival and development:
? limited knowledge of the business environment;
? no specialist staff;
? no time for planning;
? short, if any, planning horizon;
? survival/lifestyle perspective rather than a growth perspective;
Chapter 2 Contributions of entrepreneurial firms
22
? reactive rather than a proactive stance to the external environment; and
? short-term opportunistic stance rather than a long-term strategic competitive advantage
stance.
External environmental conditions shape enterprise behaviour as well as firm survival and
development (see Chapter 11). Smaller enterprises generally have a limited market share.
They also typically have the following features, which can retard firm development:
? small product range;
? limited number and range of customers (especially at business start-up);
? dependence on a single customer or small number of customers;
? limited influence on their market; and
? a tendency to resist change.
With regard to the business environment, smaller enterprises generally perceive the follow-
ing constraints on business development:
? a business environment hostile to smaller enterprises;
? have no influence on credit/discounts with suppliers;
? have no or little credibility with financial institutions;
? believe they are overwhelmed by government regulation, legislation and paperwork;
? are unaware of most direct (and indirect) government assistance to support smaller
enterprises; and
? reluctant to use (and pay) for professional external private and/or public sector advice
and support.
Smaller enterprise owners typically blame mistakes on events in the external environ-
ment (i.e., attribution theory) rather than mistakes made by themselves. Some owners
of smaller enterprises are reluctant to admit mistakes and to learn from their mistakes.
To minimise their exposure to risk in the external environmental, many owners of
smaller enterprises focus on business survival, independence and/or lifestyle issues
rather than the pursuit of rapid business growth, which can involve higher risk exposure
as well as more resources and knowledge to be invested by the entrepreneur. Conse-
quently, many surviving small enterprises remain small. Whilst smaller enterprises are
associated with numerous advantages, which can be leveraged to ensure competitive ad-
vantage, they are also generally associated with several disadvantages relating to firm
structure, management and control, operations/production, resources, strategic plan-
ning, the market, and the business environment. Practitioners may intervene to reduce
the problems faced by smaller enterprises to facilitate the wider benefits associated with
creative, innovative, flexible and dynamic and opportunity seeking smaller private
enterprises.
2.2.3 Barriers to new and small firm growth
Some new and small firms want to grow but they may be blocked by attitudinal, resource,
operational and strategic barriers to business development (see the example of Human
2.2 Challenges of entrepreneurial firms
23
Genome in Entrepreneurship in action 2.2). Practitioners, therefore, focus on business
development issues facing new and smaller firms.
Firms may face market resource barriers to business development (i.e., access to informa-
tion, finance, premises, training, skills, compliance costs associated with statutory and regu-
latory administration, etc.) (Bridge et al., 2003; DTI, 2004) (see Case 2, Fickle Rooster
Productions: Turning a hobby into a profitable business). Barriers that prevent a level play-
ing field can be termed ‘market failures’. Some entrepreneurs face market failures that can
impede business formation and development (Johnson, 2007). The concept of market
failure is the notion that markets cannot always be relied upon to deliver outcomes that are
optimal from society’s perspective. Where this is the case, there may be a role for govern-
ment intervention. Intervention will seek to foster the government’s enterprise policy objec-
tives (i.e., wealth creation and job generation and reduction in social inequality). It can also
be viewed as a vote-enhancing strategy to maximise a government’s chances of re-election.
Many governments encourage private sector organisations to address the barriers faced by
new, small and growing firms. For example, property developers are encouraged to provide
premises and these sponsored environments can increase the flows of resources to new and
growing firms (see Chapter 11) (see the example of Evans Easyspace in Entrepreneurship in
action 2.3).
Entrepreneurship in action 2.2
Human Genome: Barriers to firm growth
Human Genome [a fictitious name] emerged from
work done by a biomedical scientist who designed
new protein molecules based on an industry spon-
sored research project. The scientist realised that
he had created a set of new protein molecules that
could combat a particular viral infection in humans.
Patents were filed for the new invention. The scien-
tist, however, did not know how to exploit the innova-
tion. This novice entrepreneur with no prior business
ownership experience to leverage needed to recruit
a team of advisors from industry to guide his new
firm formation and development decisions. Due to
his reluctance to let go of some of the equity in the
business idea as well his limited social capital, the
scientist found it was difficult to assemble a team
with the skills, capabilities and knowledge to exploit
the new technology. In part, due to resource con-
straints, the scientist began working in his company
on a part-time basis. Funding was needed for a clini-
cal trial. The inexperienced novice entrepreneur who
did not have a successful track record in business
was unable on his own to secure external finance
from private venture capital firms. A business plan
was subsequently written with the team of advisors
from industry, and it was used to secure public fund-
ing for early stage clinical trials. The new ownership
team continued to develop the technology and they
discovered new and more lucrative market applica-
tions. A new chairman and chief executive officer
(CEO) joined the board to help commercialise the
technology. The team learned how to professionally
present the potential rewards (and reduce the
risks) associated with the opportunity to potential
investors. Notably, they conducted additional market
research, attracted high quality human capital, and
acquired a valuable portfolio of patents. The earlier
inability of the founding scientist entrepreneur to
develop the firm’s human and technological re-
sources, therefore, had a knock-on effect in reducing
the firm’s ability to obtain venture capital.
Source: Vohora et al., 2004.
Chapter 2 Contributions of entrepreneurial firms
24
Entrepreneurship in action 2.3
Evans Easyspace: Provision of flexible premises
to encourage new firm formation and growth
Evans Easyspace, the Leeds-based provider of flexi-
ble workspace for the SME market, has entered into
a new deal with European bank Eurohypo AG. The
agreement sees an increased facility of up to £150m,
more than double that previously available, to sup-
port the plans Evans Easyspace has in place for
growth over the next five years. This growth will be
achieved through new build, refurbishment and
acquisition of existing sites and with more than
50 business centres open or under construction
across the UK, Evans Easyspace is aiming to achieve
a £500m portfolio by 2012. Easyspace is 75 per cent
owned by the Evans Family Trust and 25 per cent is
held by the Kodak Pension Plan. Michael Evans, the
Monaco-based chairman of Leeds-based Evans
Property Group, established the company. Bradley
Cooper, finance director of Evans Easyspace, said,
‘The Evans Easyspace winning concept of easy-in,
easy-out terms has been proven across Scotland,
the North and Midlands, demonstrating the contin-
ued demand for flexible accommodation tailor-made
to suit small and growing businesses.’ Further,
he commented, ‘Evans Easyspace has a clear
programme in place for development over the next
five years, with wide scope for nationwide expansion
including the South and Ireland, which reflects our
confidence in the Evans Easyspace brand.’
Source: D. Parkin, Bank Deal Boost for Development Plans,
Yorkshire Post, 28 June 2007.
2.3 Policy to support enterprise
2.3.1 Context
In the light of the gap between the importance of entrepreneurial firms and the challenges
to their ability to realise their potential, various policy initiatives have been introduced.
The objectives of enterprise policy may relate to growth in employment, wealth creation,
improved innovation and technology diffusion and/or competitiveness as well as reducing
social exclusion and regional inequality (Storey, 1994; DTI, 2004) (see the example
of A big help for small businesses: Borough businesses benefit from grant scheme in
Entrepreneurship in action 2.4). Debate surrounds the pros and cons (Mole et al., 2008)
associated with publicly supported intervention to alleviate market failures faced by some
entrepreneurs and firms. Most governments in OECD countries provide advisory services to
enable entrepreneurs to circumvent attitudinal, resource, operational and strategic barriers.
For example, support for enterprise in the United Kingdom has evolved through marked
phases (Bennett, 2008). Business Link Operator franchises have encouraged Regional Devel-
opment Authorities (RDAs) in England and Wales to provide consultancy support. Decen-
tralised local business support (Bennett and Robson, 2003) has been provided by local
enterprise companies (LECs) in Scotland. Local support agencies are encouraged to increase
market penetration (i.e., contact more entrepreneurs and smaller firms) and to report high
customer (i.e., entrepreneur) satisfaction (DTI, 2004) with the impartial diagnostic advice
provided to local people and local businesses (Chancellor of the Exchequer, 2004). The
2.3 Policy to support enterprise
25
British government has realised the need for a balanced policy agenda (DTI, 2004), and is
encouraging business formation by novice entrepreneurs with no prior business ownership
experience, as well as supporting some existing entrepreneurs and the growth of some
‘types’ of existing firms. Although local enterprise agencies are seeking firms with employ-
ment and wealth generation potential (Mole et al., 2008), support is potentially available to
all types of entrepreneurs and firms, irrespective of their growth ambitions. Government
also recognises the need to provide targeted assistance for ‘special groups’ of entrepreneurs,
such as women and people from ethnic minorities (DTI, 2004).
2.3.2 Intervention to address barriers (and market failures) to new
and small firm growth
To encourage new firm formation and business development, government may provide
‘hard’ (i.e., financial assistance and premises) (see Chapters 6 and 12) and/or ‘soft’ assistance
(i.e., education and training) to enable entrepreneurs and firms to address barriers (or ‘mar-
ket failures’) (see the example of Scotland’s Birth Rate Strategy to encourage new firm cre-
ation in Entrepreneurship in action 2.5). Intervention is associated with costs and the
benefits of the intervention should not solely accrue to the recipients (i.e., supported entre-
preneurs and firms). There is no guarantee that intervention will address a ‘market failure’
and generate positive externalisers (i.e., the benefits of the intervention should outweigh the
Entrepreneurship in action 2.4
A big help for small businesses: Borough businesses
benefit from grant scheme
Small and medium sized enterprises (i.e., firms with
250 or less employees and an annual turnover of less
than 40m Euros (£27.9m as at January 2005)) in
Knowsley, Merseyside [in England] can apply to the
council for an Industrial Improvement Grant (IIG) for
projects creating or protecting jobs. Recently there
have been several examples of how this cash has been
used to create jobs in the borough. These include:
Mainsway Limited
This skip hire and building waste recycling business
has been operating from a site in St Helens for over
30 years. After acquiring 5.5 acres of a former land-
fill site in the centre of Huyton Business Park, the
company will be investing heavily to construct a pur-
pose built facility. The council has approved an IIG to
assist the company in their project and the creation
of 14 new jobs.
WG Wholesale/Distribution Ltd
A new start business that has successfully applied
for an IIG to help make improvements to the car
park and hard-standing area of a 30,000 square feet
unit in Yardley Road, Kirkby. With this assistance the
company intends to create 18 new jobs.
Alphasonics Ltd
An industrial cleaning equipment manufacturer
based in Caddick Road, Knowsley. The company has
been awarded an IIG to help with the costs of an
extension to their 6,000 square feet premises. Six
new jobs will be created.
Source: Knowsley Economic Forum, Business Know How, Jobs
for Knowsley, Spring 2005.
Chapter 2 Contributions of entrepreneurial firms
26
Entrepreneurship in action 2.5
Scotland’s Birth Rate Strategy (SBRS): Entrepreneurship
policy delivery
Description of the approach
In 1993, Scotland Enterprise (SEn) – the govern-
ment’s economic development agency for lowland
Scotland – launched the Scottish Business Birthrate
Strategy (SBRS). It set an ambitious target to close
the gap in the business birth rate between Scotland
and the rest of the United Kingdom by the year 2000.
Six priorities of the SBRS
? Unlocking the potential: persuading more people
in Scotland to set up businesses – including
building enterprise into the education system,
at both school and university levels.
? Improving the environment: making Scotland a
more encouraging place for entrepreneurs by im-
proving formal and informal support networks.
? Improving access to finance: helping potential en-
trepreneurs gain access to appropriate funding to
develop their businesses – including venture cap-
ital, business angel capital, and bank finance.
? Widening the entrepreneurial base: unlocking the
untapped potential among women, the under-35s
and non-home owners – all under-represented
among Scotland’s entrepreneurs.
? Increasing start-ups in key sectors: generating more
new firm start-ups in key industries, such as man-
ufacturing, high-technology and business services.
? Increase the number of fast-growing new starts:
increase the number of new firm start-ups that
achieve substantial growth, across all sectors.
Implementation of the strategy
SEn and their partners implemented the SBRS
through a variety of initiatives. These included: Per-
sonal Enterprise Shows to encourage more people
to consider starting businesses; new materials to
support enterprise education in schools; the
Prince’s Scottish Youth Business Trust; the Higher
Education Entrepreneurship Programme; new busi-
ness network groups; and easier access to improved
advisory services and finance. SEn expenditure on
the strategy was in the order of £20 million per year.
Policy re-focus after an evaluation of the SBRS
The SBRS had the following goal:
The objective is for Scotland to at least equal the UK
average of the annual number of new businesses
created per head of population by the end of the
1990s. This currently implies that Scotland would
achieve a 50% increase in the number of new busi-
nesses started every year by the end of this decade.
This would involve the creation of an additional
25,000 businesses by the year 2000.
The SBRS failed to achieve this over-optimistic tar-
get. After a major review of the strategy, the SEn
adopted a more focused approach to entrepreneur-
ship in February 2002. The new approach had the
following three main priorities:
? Encourage innovative high-growth new starts-ups,
increase the number and value of high-growth
start-ups, including start-ups in technology-based
sectors; this involved the establishment of a new,
specialist unit to support ‘high growth’ start-ups.
? Encourage more people to start businesses, by
providing quality ‘volume’ business support serv-
ices, mainly through the Business Gateway
(including specific support and targets for more
start-ups by women, the young and individuals
from socially excluded groups).
? Increase the contribution of education to the devel-
opment of entrepreneurship: develop enterprise
among young people, school and university stu-
dents, and socially excluded groups. The establish-
ment of a High Growth Start-Up Unit (HGU) was at
the core of the focus on those start-ups with the
greatest potential. It focused on technology-based
starts with potential to reach a £5m valuation after
three years. It offered intense, high-value support,
with a focus on intellectual property (IP), fund-
raising, leadership, routes to market. It was closely
linked to external networks.
Over recent years, Scottish Enterprise has developed
a suite of investment programmes (and an invest-
ment readiness programme) in conjunction with
2.3 Policy to support enterprise
27
costs of intervention and the recipients of the intervention should not solely benefit). Inter-
vention may lead to the problem of ‘government failure’ (i.e., government funding supports
entrepreneurs and firms that do not require assistance and whose behaviour is not positively
affected by the assistance) (Johnson, 2007). Rather, intervention should address areas of
‘market failure’ where public initiatives contribute to additionality by encouraging actions
that would not otherwise have been undertaken (i.e., input additionality), contributing to
better results than would otherwise have been achieved (i.e., output additionality), or
changing behaviour in a desired direction (i.e., behavioural additionality) (OECD, 2006;
Clarysse et al., 2009). The array of macro and micro-level of types of intervention are
discussed elsewhere (Storey, 1994; Bridge et al., 2003; DTI, 2004; Johnson, 2007).
2.3.3 Scepticism surrounding policy towards new and small firms
There is scepticism surrounding the value of ‘external assistance’ to new and small firms
(Bridge et al., 2003). Flynn (1993) has warned that schemes supporting new firm formation
may encourage negative selection (i.e., non-survival attributes being transferred to the next
generation of firms), and the survival of competitively weak organisations. Subsidies may
bring about a major bias in the process of market selection that hampers post-entry scale
adjustment of new firms. Holtz-Eakin (2000) has questioned whether smaller firms need
special policy help. He asserts that public policies should be devoted to developing an envi-
ronment favourable to innovation, employment and growth in the economy as a whole,
rather than support to particular types of smaller firms.
2.3.4 Need to monitor intervention and issues with blanket support
Nevertheless, governments are seeking to directly and indirectly support an enterprise cul-
ture (OECD, 1998). Numerous agencies on the ground are seeking to assist the formation
and development of different types of smaller firms. British government policy, for example,
has moved from encouraging new firm formation and self-employment, toward supporting
growing firms, and more recently to a more balanced policy agenda (DTI, 2004). An inter-
vention needs to be monitored with regard to the following issues (Storey, 1994, 2006):
? effectiveness (i.e., extent to which an intervention achieved its aim);
? efficiency (i.e., the amount of direct output that the inputs achieved);
? additionality (i.e., the net benefit that accrued due to the intervention, whether intended
or not, which would not otherwise have accrued);
? deadweight (i.e., ‘what would have happened anyway without the measure’ because some
people would have started their own businesses even if the intervention had not been
available);
private sector providers. In addition to the high
growth focus, there has been a continued effort to
encourage more people to start businesses. This is a
major component of the work of the revamped
Business Gateway, which provides an easy point of
access for existing and potential businesses.
Source: Scotland’s Birth Strategy: Entrepreneurial Culture and
Attitudes, Entrepreneurship Policy Delivery, Charlie Woods,
www.oecd.org/dataoecd/10/54/40352714.pdf.
Website:http://www.scottish-enterprise.com/sedotcom_home/
about_se/research-andpublications/business_birthrate_
strategy.htm.
Chapter 2 Contributions of entrepreneurial firms
28
? displacement (i.e., how much of the gain in one area is offset by losses elsewhere – a sup-
ported firm (i.e., job gain) may take the market share of a firm that has not been sup-
ported (i.e., job loss);
? multiplier effects (i.e., additional benefits from the indirect side-effects of intervention).
‘Blanket support’ allocated to anyone, irrespective of need, ability or previous propensity to
use external publicly supported support can be questioned. To maximise returns on public
policy investments, attempts have been made to ‘target’ external support to ‘winning firms’,
that is, businesses with significant wealth creation potential (Storey, 1994; Westhead, 1995).
This has been linked, for example, to a focus on policies targeted at stimulating sectors with
the capacity to be world leaders to fulfil their potential, and ensuring that emerging tech-
nologies become future growth sectors (Mustar and Wright, 2009). Surprisingly, the char-
acteristics and behaviour of ‘winning entrepreneurs’ have been relatively neglected
(Westhead et al., 2005a) (see Chapter 5).
2.3.5 The entrepreneur as the unit of academic and policy analysis
External support is primarily provided at the level of the individual entrepreneur during the
firm start-up process. After the firm initiation hurdles have been addressed and the firm has
commenced trading, external support for enterprise becomes more focused on the needs of
different types of firms (i.e., high-technology, family, exporting firms, etc.) (see Chapters 6,
7 and 13). There may be a need to focus upon the entrepreneur, rather than the firm alone,
throughout all stages of the entrepreneurial process. Certain types of entrepreneur may re-
quire specific (and customised) types of assistance (see Chapters 5 and 6). Analysis of the het-
erogeneity of entrepreneurs may contribute toward the development of policies tailored to
different types of entrepreneur, rather than the provision of broad ‘blanket’ policies to all
types of entrepreneur, irrespective of need or ability (Westhead et al., 2005a).
In considering the entrepreneur as a unit of policy analysis, it is necessary to appreciate
that entrepreneurs are not a homogeneous entity with regard to their human capital pro-
files, motivations, resources, behaviour and performance. An increase in the number
(stock) of businesses in an economy may not necessarily be a reliable indicator of the devel-
opment of entrepreneurship (Westhead and Wright, 1999). This is because different types
of entrepreneur own both new and established businesses. Practitioners monitoring the
growth in the supply of new firms need to be aware that habitual (i.e., serial and portfolio)
entrepreneurs with business ownership experience own a sizeable proportion of new firms.
Studies that judge the scale of entrepreneurship in terms of the number of new firms, but
ignore the scale of serial and portfolio entrepreneur activity may overestimate the gross
number of entrepreneurs, and underestimate the contribution made by particular ‘types’ of
entrepreneur (Westhead and Wright, 1998a) (see Chapter 5).
2.4 Looking forward
This chapter has highlighted the economic and non-economic contributions associated
with encouraging new firm formation and business development. Barriers to business
formation and development were summarised, and a case for practitioner intervention to
address barriers (i.e., market failures) to new private firm formation and business
Recommended further reading
29
development were summarised. The need to focus on the entrepreneur and the firm as units
of analysis in academic and policy studies was raised. In Chapter 3, we discuss ‘what entre-
preneurs do’ with regard to the entrepreneurial process. With reference to economic
approaches we discuss entrepreneurial inputs, processes and events. The following five
themes are highlighted with regard to the views of leading economists: imagination and cre-
ativity: new ideas, products and businesses (Theme 1), new combinations, radical innova-
tion, new industries and economic development (Theme 2); opportunity identification,
evaluation and pursuit: demand, supply and arbitrage (Theme 3); functions and judgements
of entrepreneurs (Theme 4); and entrepreneurial business: knowledge management, incre-
mental innovation, and resource assemblage and leverage to exploit an opportunity
(Theme 5).
Discussion questions
1 The promotion of entrepreneurship is seen as a means of combating
unemployment and poverty (Storey, 1994). Critically evaluate the contributions
of new and growing firms.
2 Why should policy-makers and practitioners intervene to support enterprise?
3 Should policy-makers and practitioners solely focus on increasing the supply of
entrepreneurs and new firms?
4 What challenges would practitioners be likely to face in implementing policy
support toward entrepreneurs rather than firms?
5 Should practitioners provide support to under-represented (and/or special)
groups?
6 Should practitioners provide ‘blanket support’ to all entrepreneurs and firms?
7 Should practitioners ‘target’ support to ‘winners’?
Recommended further reading
Clarysse, B., Wright, M. and Mustar, P. (2009). Behavioural Additionality of R&D Subsidies:
A Learning Perspective, Research Policy, 38 (10): 1517–1533.
Department of Trade and Industry (DTI). (2004). A Government Action Plan for Small Business.
Making the UK the Best Place in the World to Start and Grow a Business: The Evidence Base.
London: DTI, Small Business Service.
Holtz-Eakin, D. (2000). Public Policy Toward Entrepreneurship. Small Business Economics,
15 (4): 283–291.
Johnson, P. (2007). The Economics of Small Firms. London: Routledge.
Storey, D. J. (1994). Understanding the Small Business Sector. London: Thomson Learning.
doc_263077212.pdf
Introduction Context, Issues And Case Study Selection
Introduction: Context, issues
and case study selection
Contents
1.1 Entrepreneurship is a hot topic
1.2 Entrepreneurship as a field of study
1.3 Growth in enterprise education and the need for a text
and case study collection
1.4 The organising framework
1.5 Learning issues
1.6 Looking forward
Discussion questions
Recommended further reading
Chapter 1
Chapter 1 Introduction: Context, issues and case study selection
2
Entrepreneurship in action 1.1
Sir Stelios Haji-Ioannou and easyJet
EasyJet Airline Company Limited (referred to as
easyJet) is a British airline headquartered in London
Luton Airport. At 6.50 on 10 November 1995 easyJet’s
first flight took off from Luton in England to Glasgow
in Scotland. Incorporated earlier during the same year
by Stelios Haji-Ioannou, easyJet began operations by
taking customer bookings through its telephone
reservation centre at easyLand (i.e., home of easyJet
at London Luton airport), prior to the business going
virtual in 1998. Stelios wanted to provide low-cost
scheduled air travel on short haul routes within
Europe. He supported his venture with the
advertisement that stated, ‘making flying as affordable
as a pair of jeans – £29 one way’. Stelios encouraged
airline passengers to ‘cut out the travel agent’. On
5 November 2000 easyJet was floated on the London
Stock Exchange. Today his dream has materialised
into a pan-European airline with links to 100 airports
in a network which flew 50 million seats in 2008,
reporting £2,363 million and £123 million in sales
revenue and pre-tax profit, respectively. EasyJet has
20 bases throughout Europe and the hub is London
Gatwick. In 2009, easyJet carried 45.2 million
passengers and behind Ryanair the company is
the second-largest low-cost carrier in Europe.
Born on 14 February 1967 to Greek Cypriot
shipping tycoon Loucas Haji-Ioannou and Nedi
Haji-Ioannou, Stelios was the second of three
children. He grew up amongst the privately-owned
fleet of ships witnessing his entrepreneurial father
dominate the global shipping industry for the latter
half of the twentieth century. After finishing his
secondary education at Doukas High School in
Athens, Greece, Stelios moved to London in 1984 to
continue his undergraduate education at the London
School of Economics. In London, he then pursued
an MSc in Shipping, Trade and Finance from Cass
Business School. Due to his entrepreneurial success
Stelios has subsequently been awarded a total of
four honorary doctorates from Liverpool John
Moores University, Cass Business School, Newcastle
Business School and Cranfield University, and he
was awarded a knighthood.
After a short stint working in his father’s
shipping company, Troodos Shipping Co. Ltd, Stelios
successfully negotiated a $30 million payout from
his father to fund his own shipping company called
Stelmar Shipping. Contrary to popular belief, this
was his maiden entrepreneurial expedition. In 2001,
he floated Stelmar on the New York Stock Exchange.
Stelios sold the company in 2005 to the rival OSG
shipping group for $1.3 billion, which generated
tremendous personal wealth for Stelios.
Stelios admired his father’s success but was
determined to be independent. Modestly apologetic
about his wealthy upbringing Stelios asserted:
‘I always respect self-made people more than rich boys
like me. I cheated because I got money from my father.
Then again, when you’re 28 and you want to start an
airline; and your last name’s unpronounceable venture
capitalists aren’t going to give you any money!’
Although Stelios went on to create a number of
other businesses, many of them linked to travel,
easyJet is his most successful endeavour. While
Stelmar proved the credibility of Stelios as an
entrepreneur, easyJet has confirmed his ability as
a habitual entrepreneur (i.e., creating multiple
businesses).
Source:http://en.wikipedia.org/wiki/Stelios_Haji-Ioannou;
www.easy.com; and various.
Learning objectives
? To explain why entrepreneurship is an important (‘hot’) topic.
? To identify the main themes in studying entrepreneurship and how these are used
to structure this book.
? To identify the main learning issues that the book will focus upon.
1.1 Entrepreneurship is a hot topic
3
1.1 Entrepreneurship is a hot topic
The experience of Sir Stelios Haji-Ioannou and easyJet in Entrepreneurship in action 1.1
provides a graphic illustration of the impact that entrepreneurs can make in creating a
new venture that helped change fundamentally the rules of the game in the airline market.
But entrepreneurship takes a variety of forms and appears in both small and large firms,
in new firms and established family firms, in the formal and informal economy, in legal
and illegal activities, in innovative and more conventional concerns and in all regions and
economic sub-sectors (Organisation for Economic Co-Operation and Development
(OECD), 1998: 35). Entrepreneurial events, such as the formation and development of
businesses to pursue an opportunity, attract interest from policy-makers and practitioners
(Department of Trade and Industry (DTI), 2004). The entrepreneurial function is widely
viewed as a vital component in the process of economic growth (Baumol, 1968). The
OECD (1998: 12) asserted:
Entrepreneurship is central to the functioning of market economies. Entrepreneurs are agents
of change and growth in a market economy and they can act to accelerate the generation, dis-
semination and application of innovative ideas. In doing so, they not only ensure that efficient
use is made of resources, but also expand the boundaries of economic activity. Entrepreneurs
not only seek out and identify potentially profitable economic opportunities but are also willing
to take risks to see if their hunches are right. While not all entrepreneurs succeed, a country
with a lot of entrepreneurial activity is likely to be constantly generating new or improved prod-
ucts and services.
Policy-makers and practitioners are seeking to promote the supply of entrepreneurs in
order to encourage economic benefits such as wealth creation, job generation and compe-
tition as well as social benefits (i.e., choice and opportunity for under-represented groups
in enterprise societies such as women, young people, ethnic minorities, etc.). Promoting
entrepreneurship is part of a formula aimed at reconciling economic success with social
cohesion (OECD, 1998).
Small and medium-sized enterprises (SMEs) account for the vast majority of businesses
in most countries. Yet only a small proportion of new firms enter a high growth trajectory
like easyJet, providing a substantial contribution to jobs and sales (Storey, 1994). Entrepre-
neurs establish new and smaller firms for a variety of reasons, and not solely to satisfy the
goals of policy-makers (see Case 1, IPS Communication – Distribution: Claude Guinet’s
career in entrepreneurship). Notably, entrepreneurs may want to maintain independence
and control (Birley and Westhead, 1994). Some entrepreneurs may focus on lifestyle objec-
tives rather than profit making, professional management and job generation (Westhead
and Howorth, 2007).
Attention should, therefore, be directed towards a greater appreciation of the
attitudinal, resource, operational and strategic barriers to business formation and
development, as well as the resources and strategies selected by different types of
entrepreneurs to grow their ventures (Westhead, 1995). The economic outputs
(e.g., prices, competition, innovation, job generation, wealth creation, balance of
payments, etc.) made by different types of entrepreneurs and organisations need to be
understood.
Chapter 1 Introduction: Context, issues and case study selection
4
1.2 Entrepreneurship as a field of study
The entrepreneurial process involving all the functions, activities, and actions associated
with the perception of opportunities, and the creation of organisations to pursue them
(Bygrave and Hofer, 1991) has generated considerable academic interest. There is no agreed
definition of entrepreneurship. Further, there is concern over what entrepreneurship con-
stitutes as a field of study (Gartner, 2001; Busenitz et al., 2003). In order to promote the
study of entrepreneurship, academics have utilised a wide variety of definitions. It is, how-
ever, widely recognised that entrepreneurship involves the creation of new businesses and
the development of new and established firms.
To encourage the advancement and propagation of knowledge in the field of entrepre-
neurship (Low and MacMillan, 1988), Ucbasaran et al. (2001) have emphasised the need to
consider the contextual and process issues associated with entrepreneurship. The context of
the entrepreneurial phenomenon can be discussed not only in terms of the creation of new
independent firms, but also in terms of corporate ventures, management buyouts and
buyins, social enterprises, and the inheritance and development of family firms. Studies
have revealed that entrepreneurs are not a homogeneous entity and different types of en-
trepreneurs exist (Woo et al., 1991; Chapters 5 and 6 of this book). Sir Stelios Haji-Ioannou
represents a good example of a habitual entrepreneur who has created many businesses
(see Chapter 5). The processes associated with the entrepreneurial phenomenon can be
discussed with regard to opportunity recognition and exploitation by entrepreneurs; ability
based on skills, competencies and knowledge; and ability to obtain resources and co-
ordinate scarce resources (Shane and Venkataraman, 2000).
There has been concern that entrepreneurship is a fragmented field (Ucbasaran et al.,
2001; Schildt et al., 2006), and this fragmentation may hinder scholarly development and
legitimisation of the field. However, there is evidence of maturity and convergence in entre-
preneurship as a set of codified theories, models, methods, and measures that direct the
research agenda emerge (Grégoire et al., 2006). With reference to the citation patterns of
entrepreneurship articles published in the years 2000 to 2004, Schildt et al. (2006) detected
that the ten most frequently cited themes relate to:
? societal consequences of entrepreneurship (see Chapter 2);
? conceptualisation of the entrepreneurial process (see Chapter 3);
? alertness, opportunity creation and creative destruction (see Chapter 3);
? psychological characteristics of entrepreneurs (see Chapter 4);
? entrepreneurial networks and resource accumulation (see Chapters 3, 5, 6 and 10);
? corporate entrepreneurship and venturing (see Chapter 8);
? born-global firms (see Chapter 13); and
? entrepreneurial firm survival and growth (see Chapters 13 and 14).
The following themes have also attracted considerable attention:
? risk-taking among entrepreneurs (see Chapter 3);
? organisational (entrepreneur) learning and problem-solving (see Chapter 5);
? trust and relational capital (see Chapter 5);
? leadership and management teams (see Chapters 6, 7, 8 and 9);
1.3 Growth in enterprise education and the need for a text and case study collection
5
? organisational decision-making (see Chapter 6, 7, 8, 9 and 14);
? knowledge-based view of the firm (see Chapter 6);
? high-technology entrepreneurship (see Chapter 6);
? environmental determinants of entrepreneurial success (see Chapter 11);
? institutions and institutional entrepreneurship (see Chapters 6, 11 and 12).
Chapters in this text key into established and emerging dominant themes within the field of
entrepreneurship, which are being explored using a variety of theoretical and methodolog-
ical lenses (Busenitz et al., 2003; Gartner et al., 2006). Markedly different lists of key articles
and scholars in the field of entrepreneurship have, however, recently been presented
(Cornelius et al., 2006; Reader and Watkins, 2006).
1.3 Growth in enterprise education and the need for a text
and case study collection
Recognition that entrepreneurship is the oxygen that ensures national, local and economic
development as well as facilitating social cohesion linked to personal choice and empower-
ment for disadvantaged members of society (OECD, 1998; DTI, 2004), has led to a massive
growth in entrepreneurship teaching (Gormon et al., 1997). In the United Kingdom, for
example, this has been aided by funding through the Department of Trade and Industry’s
Science Enterprise Challenge Fund Centres, which has encouraged more engineering and
science students to consider business ownership as a career option. The Lambert Review
(2003) has further emphasised that science and technology students need to accumulate
entrepreneurial skills. Arts students in the United Kingdom are also being encouraged to
accumulate entrepreneurial skills to enter creative industries (Department for Culture,
Media and Sport (DCMS), 2006) (see the example of Kylie Minogue the diva and entrepre-
neur in Entrepreneurship in action 1.2). Throughout Europe, the European Commission is
seeking to facilitate the ‘fostering of entrepreneurial mindsets’ throughout society
(European Union, 2000; Hannon, 2007).
Why entrepreneurship should be seen as different from other subjects is quite baf-
fling. Yet, there is debate on whether students can be taught how to become entrepre-
neurs (Fiet, 2000). Evaluation is difficult because there is a lack of clarity about what is
meant by an enterprise culture (Della-Giusta and King, 2006), and the definition of the
skills required for enterprise. Jack and Anderson (2001) suggest that teaching entrepre-
neurship is difficult because the entrepreneurial process (i.e., imagination, creativity,
innovativeness, creating and/or identifying resources, assembling and managing
resources, etc.) involves both an ‘art’ (i.e., the creative and innovative attributes) and a
‘science’ (i.e., functional skills of business and management). Numerous business and
management schools worldwide (Solomon, 2007) now deliver an array of entrepreneur-
ship and small business modules at various levels. There is growing appreciation that
even more institutions should provide entrepreneurship and small business modules.
Programmes are now being designed for non-business students (i.e., arts, media,
design, science and engineering students). Evidence from the United States suggests that
Chapter 1 Introduction: Context, issues and case study selection
6
there is still a demand for ‘business plan’/‘new venture plan’ modules that require
evidence to guide:
teaching the nuts and bolts of entrepreneurship and small business management (Solomon,
2007: 179).
There is, however, a growing need to craft courses and programmes that meet the
rigours of academia, while keeping a reality-based focus and entrepreneurial climate in the
learning experience environment.
A common element of most entrepreneurship and small business management modules
is the exploration of case studies to illustrate how problems and opportunities are
addressed by real entrepreneurs. Case studies can illustrate the ‘art’ (i.e., the creativity,
Entrepreneurship in action 1.2
So Lucky: Kylie Minogue the diva and entrepreneur
It’s rare to get a glimpse inside the world of a
celebrity’s actual business empire, which is what
makes a story from British newspaper Mail on
Sunday about the financial world of Kylie Minogue
so interesting.
The paper obtained the financial accounts of
Kylie’s company Darenote Limited from Britain’s fi-
nancial reporting regular, Companies House. They
show the business empire of the pop princess made
a profit of $6.8 million in the 12 months to April
2009, up sharply from the $2.1 million it made the
previous corresponding period.
According to the report, the accounts (signed off
by Kylie’s accountant father Ron Minogue) show a
dividend of almost $2 million was paid from
Darenote to Kylie herself. For someone who had her
first hit more than 20 years ago, the Darenote profit
really highlights the singer’s impressive longevity
and remarkable earnings power.
But look closely at the way Kylie has structured
her business affairs and you can see some lessons
that all entrepreneurs can use:
? Concentrate on high margin jobs. It’s worth
noting that as with most performers, Minogue’s
earnings are drawn mostly from the old-fashioned
source of long, hard tours – mainly due to the fact
that she gets to keep so much more of the revenue
generated by ticket sales as opposed to album
sales. Indeed, albums increasingly act as loss-
leaders for many artists, particularly those who
can draw huge crowds like Kylie.
? Premium pays. In late 2009 (during the period cov-
ered by the Darenote accounts) Kylie appeared at
a special concert to open a hotel in Dubai. VIP or
private appearances attract huge dollars for
artists – all of which shows that exclusivity does
have a real value.
? Diversify. The problem for many celebrities is that
earnings can be so up and down. To smooth this
out, artists such as Kylie extend their brands into
other areas. Minogue’s endorsements include
homewares, perfume (for women and men),
books and clothing.
? Tap into new markets. Minogue has been brilliant
at constantly finding new markets – just look at
the way she still attracts customers who loved
her as an actor, 1980s music star, pop diva, gay
icon and fashion icon. She’s also continued to
look to expand geographically. The Dubai hotel
show was her first in the Middle East, while she
launched her first major US tour in late 2009.
Source: J. Thomson, SmartCompany, Entrepreneur Watch,
15 March 2010.
1.3 Growth in enterprise education and the need for a text and case study collection
7
imagination, innovativeness and problem-solving skills) (Lumsdaine and Binks, 2003)
and ‘science’ (i.e., strategy, planning, marketing, financial, project management, time
management, leadership, motivation, delegation, communication and negotiation skills)
(Westhead and Matlay, 2006; Wickham, 2006) skills and capabilities that have to be
accumulated and leveraged by entrepreneurs.
Numerous practical, theoretical and policy books are available relating to entrepreneur-
ship and small business developmental issues (Storey, 1994; President and Fellows of
Harvard College, 1999; Bolton and Thompson, 2000; Bridge et al., 2003; Kirby, 2003; Lums-
daine and Binks, 2003; Kuratko and Hodgetts, 2004; Carter and Jones-Evans, 2006; Deakins
and Freel, 2006; Wickham, 2006; Burns, 2007; Storey and Greene, 2010). Most books gener-
ally focus on small business issues, or solely discuss how to establish a new business. A dis-
tinction can be made between practically orientated books as opposed to theoretical and
policy orientated books. Both streams of textbooks seek to illustrate key issues with regard
to very brief case study examples. In many instances, the case studies appear as an after-
thought to illustrate how theoretical or practical issues are actually exhibited by real entre-
preneurs and businesses.
This text and case study collection is designed to meet the need for an accessible re-
source that will stimulate critical thinking and reflective learning relating to issues gener-
ally abstractly (and briefly) discussed in lectures. In addition, it will be useful in seminars
focusing on key issues that need to be considered with regard to an idea and/or a business
plan module, as well as theory or policy orientated entrepreneurship and small business
modules. Our aim is to provide undergraduate and postgraduate students, as well as aca-
demics, policy-makers and practitioners, with deeper insights into the entrepreneurial
and wealth-creating processes, as well as the processes relating to small business develop-
ment. Case studies are linked to clear learning outcomes that are stated prior to the pres-
entation of each case study. A separate teaching note solely available to module
convenors and tutors will guide students through the issues that need to be considered.
Students are encouraged to read one or more of the longer cases for each chapter, pre-
sented at the end of the book. Some cases relate to more than one theme. The 25 longer
cases are listed in Table 1.1.
We do not provide an exhaustive review of all themes in the field of entrepreneurship
and small business development, or a detailed discussion of all tools that can be used to
generate and exploit business opportunities. This textbook provides contextual evi-
dence relating to the actual behaviour of real entrepreneurs and organisations, like Sir
Stelios Haji-Ioannou and easyJet, and it complements materials available elsewhere.
Articles included within the Carter and Jones-Evans (2006) edited edition, for example,
cover many important themes and illustrate patterns and behaviour with regard to
entrepreneurs and their organisations. Several edited volumes of general readings also
focus upon entrepreneurship and small business development (Casson, 1990; Acs, 1996;
Birley, 1998; Storey, 2000; Westhead and Wright, 2000; Hitt and Ireland, 2005; Casson
et al., 2006; Cuervo et al., 2008; Storey and Greene, 2010), as do readings relating to new
firm formation (Davidsson, 2006a), technological entrepreneurship (Siegel, 2006),
management buyouts (Wright and Bruining, 2008), family firms (Poutziouris et al.,
2006), female entrepreneurship (Brush et al., 2006) and international entrepreneurship
(Dana, 2004).
Chapter 1 Introduction: Context, issues and case study selection
8
Table 1.1 Case studies and linkage to chapters
Case title Author(s) Chapter Secondary
link chapter links
1 IPS Communication – Distribution: Claude Guinet’s
career in entrepreneurship
Joëlle Piffault and Louis
J. Filion
1 3, 4, 5, 7
2 Fickle Rooster Productions: Turning a hobby
into a profitable business
Kirk Frith 2 3
3 The Recording Room: Ben Wallace’s musical ventures Ed McMullan 3 2
4 Portable Patient Lifts, LLC: Patent and start-up issues Gerard M. Campbell 3 2, 6, 12
5 Original Voddy Company Limited Andy Corcoran 3 12, 13
6 Alba Adventures: An entrepreneur pushed
into entrepreneurship
Marlene Mints Reed 4 10, 11, 12
7 Ace Cleaning (UK) Limited: Development of
a purchased firm by a novice entrepreneur
Mark Freel 4 2, 9, 11, 12, 14
8 The OffQuip saga: Partner entry and exit dynamics Louis J. Filion 5 14
9 Iain Russell and Arran Aromatics Limited: Portfolio
and serial entrepreneurship
Carol Craig and Frank Martin 5 3, 4, 11, 13, 14
10 Marine Products Limited: Confronting barriers
to innovation
Povl Larsen and Alan Lewis 6 2, 12
11 Deep Sea Fishing Inc: Acquiring the ‘right’ capital
for a new technology-based firm
Alf Steinar Saetre and Truls
Erikson
6 12
12 Painatolo Ltd and Rakennuspalvelu Ltd: Family
business transfer issues
Ulla Hytti, Kirsi Lamminpää
and Pekka Stenholm
7 2
13 Spin-offs at Tremcar: Partnerships for growth Caroline Mireault, Danielle Luc
and Louis J. Filion
8 14
14 Wemas International Limited: Purchase and
turnaround of an existing business by Brent Lybbert
Ed McMullan 9 3, 12
15 Seagate Technology Mike Wright and Angela Loihl 9 12, 14
16 Hill Holt Wood: Community-owned social enterprise Kirk Frith and Gerard McElwee 10 11, 14
17 Rad-Amer Intourist: American entrepreneur
opportunity recognition and exploitation in Moscow
Zafar U. Ahmed, Peter Robinson
and Leo Paul Dana
11 3
18 The Fleet Sheet: New firm creation in a transition
economy
Marlene Mints Reed 11 2
19 BCH TeleCommunications Marlene Mints Reed 11 2, 3
20 UFO Pictures: The challenges of film production Marlene Mints Reed 12 2, 11
21 New Covent Garden Soup Company: Contributions
made by venture capitalists
Mike Wright 12 14
22 AAC Limited: Entrepreneurial team dynamics Eva Jaro? sová and Joan Winn 13 3, 11
23 Model Kit World: Firm growth through geographic
expansion
Alex S. L. Tsang, Wai-Sum Siu
and Gloria H. Y. Ting
13 3, 11
24 Upstart Graphics: Merger and acquisition issues Donald M. DePamphilis 14 12
25 Private family health practice: Limits to growth Suzanne Hetzel Campbell
and Christopher L. Huntley
14 2
1.4 The organising framework
9
1.4 The organising framework
Themes explored in this book illustrate developments in the field of entrepreneurship. A broad
view of entrepreneurship is operationalised. Gartner (1985) presented a conceptual framework
for describing the phenomenon of new venture creation that integrated four major perspectives
in entrepreneurship: the characteristics of the individual(s) starting the new venture; the organ-
isation they create; the environment surrounding the new venture; and the process by which the
new venture is created. Guided by these insights, the six themes within the emerging stream en-
trepreneurship studies highlighted by Ucbasaran et al. (2001) are drawn upon in the chapters
presented here. Short entrepreneurship in action vignettes and longer cases are linked to one or
more of the six themes highlighted in Figure 1.1. The themes are as follows:
? Theme 1: Theory. Cases can be linked to economic, psychological, cognitive, sociologi-
cal, and opportunity identification and exploitation theories exploring the entrepre-
neurial process and the behaviour and performance of entrepreneurs and their
organisations. Entrepreneur and/or organisation resources and behaviour are illustrated
in contrasting industrial, locational, national and cultural contexts.
? Theme 2: Types of entrepreneur are examined in terms of academic, novice, serial,
portfolio and social entrepreneurs.
? Theme 3: The process of entrepreneurship is examined in terms of opportunity creation,
recognition, information search and learning, and resource acquisition and leverage as
well as the competitive strategies selected by entrepreneurs. Methods of best entrepreneur
and business practice are illustrated.
Theme 6
Outcomes
• entrepreneur and
organisation performance
and growth
• venture exit
Learning
Theme 1
Theoretical
antecedents
Theme 2
Type of entrepreneur
• nascent
• novice
• serial
• portfolio
Theme 3
Process
• opportunity recognition
and information search
• resource acquisition
and business strategies
Theme 4
Type of organisation
• start-ups
• corporate venturing
• MBOs/MBIs
• franchising
• inheritance
Theme 5 External environment
Figure 1.1 The focus of entrepreneurship research
Source: Ucbasaran et al. (2001, Figure 1:59).
Chapter 1 Introduction: Context, issues and case study selection
10
? Theme 4: Organisational types. Organisational modes selected by entrepreneurs are
examined, including family firms, corporate entrepreneurship, management buyouts
and social enterprises.
? Theme 5: The external environment for entrepreneurship. Governments in developed
and developing economies have introduced policies to address attitudinal, resource, op-
erational and strategic barriers to business formation and development. The merits and
disadvantages of targeted and customised support to entrepreneurs and firms are being
considered by practitioners. Case studies from the United Kingdom and United States
are presented as well as other institutional contexts such as emerging economies.
? Theme 6: Outcomes of entrepreneurial endeavours. The economic and non-economic
outcomes of entrepreneurial endeavours are illustrated with reference to the entrepre-
neur and firm units of analysis. The issue of entrepreneurial learning is discussed
throughout the book.
Text, short entrepreneurship in action vignettes and longer cases illustrate the dynamics of
entrepreneurs and the organisations they own. Evidence relating to the actual resources
and behaviour of different types of entrepreneurs and organisations are illustrated. We
highlight that the ‘entrepreneur’ and the ‘organisation’ should be the unit of academic and
policy analysis. We explore the behaviour of entrepreneurs and illustrate how entrepre-
neurs acquire information, how they learn from their entrepreneurial experiences, and how
they utilise acquired knowledge to develop their organisations. A distinction between dif-
ferent ‘types’ of entrepreneurs and organisations is highlighted in several national contexts.
Methods of best entrepreneur (and organisation) practice in relation to imagination, cre-
ativity and innovation as well as methods to address barriers to enterprise and business de-
velopment are raised. Several cases highlight that the entrepreneurial process can be
moderated by external environmental conditions. Outcomes associated with contrasting
enterprise and competitive strategies are illustrated.
1.5 Learning issues
This book seeks to develop an understanding of entrepreneurs and the organisations they
create, own, manage, develop and exit. It is designed to:
? provide an understanding of the nature, role and functions of different types of entre-
preneurs and organisations owned by entrepreneurs;
? examine the characteristics, attributes and resources of different types of entrepreneurs;
? demonstrate the variety of forms of entrepreneurial processes relating to new firm cre-
ation, enterprise within larger firms, business development and exit route selection;
? critically consider the array of factors associated with enterprise development;
? demonstrate the influence of external environmental conditions, including public
policy, on the entrepreneurial process;
? highlight the barriers faced by entrepreneurs and discuss methods selected by entrepre-
neurs to address identified barriers; and
? highlight practical issues that need to be considered to create, identify, evaluate, pursue
and exploit a business opportunity.
1.5 Learning issues
11
In the following chapters, text, short case study entrepreneurship in action vignettes and
longer cases are presented to highlight key issues relating to entrepreneur and organisation
behaviour. The broad purpose of each chapter and its associated cases is to enable the
reader to:
? acquire an understanding of practical and policy debates in developed and emerging
economies (i.e., Europe, North America, Scandinavia, China and Russia);
? think critically about the concepts presented in each case;
? think critically about the practical options available; and
? use the case studies to formulate and guide their individual studies for a dissertation
and/or assignments.
Each chapter will review the literature relating to the selected theme. Key issues will be
highlighted and they will be illustrated in the cases, which will ‘talk’ and exhibit people, pat-
tern and process issues.
Short entrepreneurship in action vignettes and longer cases illustrate issues that
students have to consider with regard to both the ‘art’ (i.e., the creative and innovative
attributes) and the ‘science’ (i.e., business and management functional skills) of entrepre-
neurship and small business development. Cases illustrate ‘how’ and ‘why’ entrepreneurs
and their organisations behave as they do in relation to the creation, pursuit and exploita-
tion of opportunities. Several cases highlight key practical and/or policy issues. Longer case
study authors make linkages to the current body of knowledge to emphasise issues the
reader should critically reflect upon. Specific questions are presented at the end of each case
to guide students’ critical reflection and learning.
Case study authors are drawn from several disciplines. Consequently, alternative prac-
tical lenses are exhibited in the cases to explore and critically reflect upon the actual be-
haviour of entrepreneurs and their organisations. Cases relate to a variety of industrial,
locational, national and cultural contexts. Several cases highlight that the institutional
context and the profiles of entrepreneurs shape the entrepreneurial process and business
development.
Education institutions throughout the world are encouraging Science, Engineering,
Media, Art and Design students to participate in entrepreneurship and small business
management modules. Selected cases will interest students drawn from a variety of disci-
plines. The cases explore and illustrate business formation and development issues relat-
ing to traditional industries as well as the increasingly important creative, knowledge and
technology-based industries. Notably, the cases illustrate the judgements and behaviour
of actual entrepreneurs. Further, the cases illustrate the dynamics of entrepreneurs and
the organisations they own. Cases illustrate how entrepreneurs acquire information, how
they learn from their entrepreneurial experiences, and how they utilise acquired knowl-
edge to develop their organisations. The following important and novel themes are
raised in the cases:
? The ways in which entrepreneurs’ attitudes and human capital resources (i.e., spe-
cific human capital relating to industry know-how, management know-how, and
entrepreneurial capabilities, etc.) can shape the business start-up process and subse-
quent firm development. Issues relating to the supply of entrepreneurs are, there-
fore, discussed.
Chapter 1 Introduction: Context, issues and case study selection
12
? The cases illustrate several dimensions of the entrepreneurial process relating to imagina-
tion, creativity and innovation as well as issues relating to information search, opportu-
nity identification, evaluation and pursuit. The increasing importance of international
business is also highlighted in several cases.
? Obstacles faced by particular types of entrepreneurs (i.e., young and inexperienced en-
trepreneurs, owners of knowledge-based firms and family firms, social entrepreneurs, as
well as female entrepreneurs and experienced portfolio and serial entrepreneurs) are
illustrated.
? Resource assemblage and leverage issues to exploit an opportunity are explored. The
need for teams of entrepreneurs with diverse human capital profiles is highlighted. In
addition, the methods used by entrepreneurs to circumvent attitudinal, resource,
operational and strategic barriers to firm formation and development are shown. The
assets and liabilities associated with solo entrepreneurship as well as team entrepre-
neurship are highlighted. Further, the accumulation and leverage of social capital (i.e.,
networking) to address barriers to innovation and firm formation and development is
illustrated.
? Issues relating to corporate entrepreneurship within existing larger organisations are
raised. The academic entrepreneurship context is discussed.
? The emerging theme of social entrepreneurship is illustrated.
? The external environment for entrepreneurship is considered throughout the book as
a moderator that can impact on the behaviour of entrepreneurs and organisations.
Cases relate to several national and industrial contexts (i.e., traditional, knowledge
and technology-based, creative industries, etc.). The role played by public policy (i.e.,
provision of grants and advice, education and training) shaping the entrepreneurial
process is described.
? Outcomes associated with entrepreneurial endeavours are highlighted. Financial and
non-financial issues are explored. As entrepreneurship is not a single action event, with
some entrepreneurs having careers in entrepreneurship, the habitual entrepreneur phe-
nomenon is illustrated. Several exit routes are open to entrepreneurs. Business transfer
issues are highlighted.
After reading the entrepreneurship in action vignettes and the cases the reader should be
able to:
? demonstrate a knowledge of issues pertaining to the role, nature and function of the
entrepreneur;
? apply various concepts to understanding the needs and contributions made by different
‘types’ of entrepreneurs and organisations;
? demonstrate a knowledge of the stimuli and obstacles (i.e., resource needs) to business
formation, purchase and development;
? demonstrate a knowledge of the tools used by entrepreneurs to generate, create, evalu-
ate, pursue and exploit business opportunities;
? demonstrate a knowledge that the external environment (i.e., institutional context) can
shape entrepreneurial processes and business development;
? demonstrate knowledge of the tools that can be applied to ensure a firm’s
competitive advantage and to address constantly emerging barriers to business
development; and
? demonstrate how entrepreneurs learn from their successes as well as their mistakes.
Recommended further reading
13
1.6 Looking forward
This chapter has highlighted that encouraging entrepreneurship (i.e., innovation, opportu-
nity identification and exploitation, new firm creation, and firm grow in domestic and in-
ternational markets) in new and established organisations can encourage economic and
non-economic benefits to society. Established and emerging themes relating to the entre-
preneurial process have been summarised. Key elements of the entrepreneurial process
were briefly discussed. A distinction between the ‘art’ and ‘science’ of entrepreneurship was
made. The content and structure of the book as well as key learning issues were also dis-
cussed. Chapter 2 explores in more detail the economic and non-economic contributions
of entrepreneurial firms. Barriers to new private firm formation and business development
are summarised. The case for intervention to address barriers (i.e., market failures) to busi-
ness formation and development is presented. The need to focus on the entrepreneur (as
well as the firm) as the unit of analysis in academic and policy studies is raised.
Discussion questions
1 What is entrepreneurship? Discuss the elements of the entrepreneurial process.
2 What are the key elements of the ‘art’ and ‘science’ of entrepreneurship?
3 Why is entrepreneurship important for society?
4 Why do governments in both developed and developing countries attach an
importance to promoting enterprise?
Recommended further reading
Gartner, W. B. (2001). Is There an Elephant in Entrepreneurship? Blind Assumptions in Theory
Development. Entrepreneurship Theory and Practice, 25 (4): 27–39.
Gartner, W. B., Davidsson, P. and Zahra, S. A. (2006). Are You Talking to Me? The Nature of
Community in Entrepreneurship Scholarship. Entrepreneurship Theory and Practice, 30 (3):
321–331.
Grégoire, D. A., Noël, M. X., Déry, R. and Béchard, J-P. (2006). Is There Conceptual Convergence
in Entrepreneurship Research?: A Co-Citation Analysis of Frontiers of Entrepreneurship
Research, 1981–2004. Entrepreneurship Theory and Practice, 30 (3): 333–373.
Schildt, H. A., Zahra, S. A. and Sillanpää, A. (2006). Scholarly Communities in
Entrepreneurship Research: A Co-Citation Analysis. Entrepreneurship Theory and Practice,
30 (3): 399–415.
Ucbasaran, D., Westhead, P. and Wright, M. (2001). The Focus of Entrepreneurial Research:
Contextual and Process Issues. Entrepreneurship Theory and Practice, 25 (4): 57–80.
Contents
2.1 The positive contributions of entrepreneurial firms
2.2 Challenges of entrepreneurial firms
2.2.1 Reluctance or inability of most new and small firms to grow
2.2.2 Differences between smaller and larger enterprises
2.2.3 Barriers to new and small firm growth
2.3 Policy to support enterprise
2.3.1 Context
2.3.2 Intervention to address barriers (and market failures) to new
and small firm growth
2.3.3 Scepticism surrounding policy towards new and small firms
2.3.4 Need to monitor intervention and issues with blanket support
2.3.5 The entrepreneur as the unit of academic and policy analysis
2.4 Looking forward
Discussion questions
Recommended further reading
Chapter 2
Contributions of entrepreneurial firms
2.1 The positive contributions of entrepreneurial firms
15
Learning objectives
? Highlight differences between smaller and larger enterprises and barriers to
enterprise.
? Discuss diverse economic and social contributions made by entrepreneurs, new
firms and growing firms.
? Analyse issues relating to job generation, wealth creation, job generation,
competitiveness and innovation, as well as reduction of social and regional
inequality.
? Consider the case for intervention to support enterprise.
? Analyse the case made for the entrepreneur and the firm to be units of academic
and policy attention.
? Discuss the case for ‘targeted’ support.
2.1 The positive contributions of entrepreneurial firms
Debate surrounds the economic and non-economic contributions made by entrepreneurs,
new firms and a growing stock of entrepreneurial firms (Acs and Storey, 2004; Johnson,
2007). These contributions are summarised in Table 2.1. Entrepreneurial firms are impor-
tant because they can make several economic and non-economic contributions. They play
a role in encouraging economic development (Baumol, 1968; Carree et al., 2007). Entrepre-
neurial firms have a role in reducing unemployment and poverty (Storey, 1982). They are
major creators of new jobs when large firms are downsizing (Birch, 1979), irrespective of
the economic cycle (DTI, 2004). Entrepreneurial firms generate wealth creation and the
firm, entrepreneur(s) and employees can be taxed. Government can reinvest this taxation
into economic development projects (i.e., enterprise and small firms policy and/or other
social projects). Entrepreneurial firms are seen as the seeds from which large successful
organisations grow (i.e., Microsoft, Cisco Systems, Body Shop, etc.).
Entrepreneurial firms stimulate competition, which limits the ability of dominant firms
to raise prices. Competition can lead to a reduction in prices, more consumer choice,
encourage the creation and dissemination of new innovative products/services and/or
better quality products and services. Moreover, competition encourages more efficient use
of resources and the displacement of non-viable inefficient businesses:
If incumbent businesses are unable to match the productivity of new or fast growing small busi-
nesses, then they are either forced to exit the market or their market share is reduced, so increasing
the productivity of the market as a whole (DTI, 2004: 17).
Viable businesses that are more efficient users of resources will be associated with superior
levels of productivity, which can enable them to sustain competitive advantage in local and
international markets. Efficient entrepreneurial firms that can internationalise can create
jobs and wealth. Internationalising firms are also less likely to displace new and established
firms in local markets. Efficient firms can reduce the flow of imports, and they can play a
role in reducing balance of payments deficits.
Chapter 2 Contributions of entrepreneurial firms
16
Table 2.1 Entrepreneurial firms: Positive economic and non-economic contributions and negative
barriers to enterprise
Positive contributions Negative barriers
Economic
• Economic development
• Reduction of unemployment and poverty
• Job generation when large firms are downsizing,
irrespective of economic cycle
• Wealth creation
• Taxes (firm, entrepreneur and employees) and this tax
income can support the economic, social and political
agendas of government
• Entrepreneurial ‘seed’ firms can grow into large ‘oaks’
firms
• Competitiveness (i.e., reduction of power of large firms,
lower prices, better quality products/services,
consumer choice, better utilisation of scarce resources,
displacement of inefficient firms, etc.)
• Productivity
• Large firm competitiveness enhanced by
entrepreneurial firms involved in the supply-chain
• Internationalisation, reduction of flow of imports and
balance of payments deficits
• Radical and incremental innovation, technology; creation
of new industries and markets; competitive advantage
not solely related to ‘sweating low cost labour’
• Service role – provision of essential consumer services
for ‘quality of life’
• Harmonious working environment with fewer industrial
disputes and lower absenteeism
• Seedbed role promoting the next generation of
entrepreneurs
• Protection and promotion of local communities
• Local economic development in inner cities, former
coal, fishing, mining and steel communities and
peripheral rural communities
• Multipliers – direct and indirect job generation and
wealth creation generated by new clusters of
entrepreneurial firms
Non-economic
• Reduction of social and regional inequality with regard
to access to wealth creation
• Under-represented groups (i.e., disabled, ethnic
minorities, graduates, women, young people, etc.) to
select careers in enterprise
• Empowerment (i.e., independence, control, satisfaction,
fulfil family and household responsibilities, etc.)
• Votes – policy-makers supporting enterprise are
re-elected
Macro-economic
Business and personal taxation, interest rates, exchange
rates, public spending, inflation policy, regulatory
framework
Cultural barriers and narrow education base
Advantages of large firms
Attitudinal barriers
Reluctance to select a career in enterprise; establish a
firm for independence, and/or lifestyle reasons,
reluctance to move outside the ‘management comfort
zone’; desire for a ‘born small stay small firm’, reluctance
to sell equity to ‘outsiders’ and to use ‘external’
professional advice, etc.
Resource barriers
Information, finance, premises, skilled labour, machinery,
equipment, etc.
Operational barriers
Imagination, creativity, innovation (radical or incremental),
legitimacy, appropriate administrative, management and
production systems, inability to protect the product/
service/brand, skills and capabilities deficiencies, etc.
Strategic barriers
Focus on low price strategy rather than a premium
price strategy, inability to introduce market and/or
technological differentiation, inability due to attitudinal
and resource deficiencies to create new source(s) of
competitive advantage, and/or to proactively adapt to
constantly changing market, technological and regulatory
conditions, etc.
Government failure
Government supports firms that do not require assistance
and this assistance does not generate positive
externalities
Entrepreneurial firms have a key role in introducing new product and process innova-
tions. Some firms play a niche role providing something marginally different. Entrepre-
neurs with unique scientific or technological knowledge create radical innovations that can
lead to the creation of new industries, which can promote economic development
2.2 Challenges of entrepreneurial firms
17
associated with the ‘creative destruction’ of some old industries (Schumpeter, 1934). ‘Born
global’ innovative firms can play a role in reducing balance of payments deficits (see
Chapter 13). However, only a small proportion of firms are engaged in truly innovative ac-
tivities (Storey, 1994). Many new and small firms are imitative, and they generally intro-
duce incremental innovations to sustain their competitive advantage.
Most entrepreneurial firms, especially smaller firms, are engaged in the service sector,
either servicing private consumers (i.e., catering, retail or repair) or other enterprises (i.e.,
business services). They provide an essential service role (i.e., personal and community
services) to the way of life of many people. The servicing relationship between an entrepre-
neurial firm and its customers (i.e., subcontracting) can range from co-operation to de-
pendency and exploitation. Entrepreneurial firms support the infrastructural needs of
larger firms. Many large firms would not be able to remain profitable without the service
provided by new and small firms in their supply-chain (i.e., Nissan in the north-east of
England is supplied by small firms who may solely exist to service the needs of Nissan).
Entrepreneurial firms indirectly ensure the competitiveness, profitability and contribution
to economic development made by major ‘corporate prime movers’.
Entrepreneurial firms, especially small firms, can provide a harmonious working envi-
ronment that is often reflected in fewer industrial disputes and lower absenteeism. They
can provide a nurturing role model and learning environment for potential entrepreneurs
(i.e., management, industry and finance know-how, diverse business networks, etc.). An
environment that supports individualism and reduces a dependency culture on the state
and larger firms can also reduce the power of the trade union movement.
Entrepreneurial firms are developers of the local economy. They make a contribution to
the regeneration of deprived rural as well urban communities. New and small entrepre-
neurial firms frequently service local markets. The entrepreneur(s) may live locally and feel
an allegiance to the area where the business is located. They generally employ local people
and they use local services and suppliers. This activity can generate local multiplier effects
that promote the demand for other potential new firms, which can promote a local spiral of
wealth creation and job generation to reduce local unemployment and poverty.
2.2 Challenges of entrepreneurial firms
2.2.1 Reluctance or inability of most new and small firms to grow
There are numerous barriers to enterprise (Bridge et al., 2003; DTI, 2004). Broad types of
negative barriers to enterprise are summarised in Table 2.1. The attitudes of individuals are
a major barrier to new firm creation and development. There are different types of firms
and entrepreneurs with most new firms not desiring or reporting significant growth. Most
new firms are ‘born to die young’ as most cease to trade within three years of inception
(Storey, 1994). The majority of firms that survive are ‘born small and stay small’. Many
small firms are more interested in maintaining their current level of profit than in expan-
sion. One reason for firms wishing to stay small is that the ownership and management
reside in the same person, or persons; so future firm goals are determined not only by
commercial considerations but by personal lifestyles and family factors relating to the
individuals or teams of individuals who own and manage them (see Chapter 14). However,
Chapter 2 Contributions of entrepreneurial firms
18
it seems that the proportion of small businesses that want to grow is greater than the num-
bers that actually do grow (DTI, 2004).
A distinction can be made between ‘failures’ (i.e., the high proportion of small firms that
have a short life), ‘trundlers’ (i.e., a large group of surviving small firms that remain small),
and ‘flyers’ (i.e., the small proportion of firms that have rapid growth in employment)
(Storey, 1994). Firm development may be restricted by entrepreneurs who want to main-
tain ownership and control of their firms and who may only grow their ventures to an in-
ternal ‘management comfort zone’, which allows owners to maintain control and ownership.
Storey et al. (1987) noted that 4 per cent of firms generated 50 per cent of job generation by
the firms in the sample over a decade. Similarly, Gallagher and Miller (1991) detected that
the high flyers in their sample (18 per cent of firms) accounted for 68 per cent of all jobs
created. Policy-makers concerned with job generation, wealth creation, competition, effi-
cient markets, technology diffusion and votes (i.e., re-election) (Storey, 1994) may seek to
increase the supply of entrepreneurs and entrepreneurial firms in society because each new
firm can play a valuable economic and/or social role, but they particularly want to increase
the number of high-growth ventures.
2.2.2 Differences between smaller and larger enterprises
Entrepreneurial firms can be both large and small. Many large enterprises have become so
by having been entrepreneurial and growing rapidly, and may continue to be entrepreneur-
ial through continuously investing in innovation, as well as seeking and exploiting new
opportunities (see Chapter 8). Not all smaller enterprises are entrepreneurial. Smaller pri-
vate enterprises cannot therefore be regarded as a homogeneous entity. Further, smaller
private enterprises cannot be viewed as scaled down versions of larger enterprises. Smaller
private enterprises differ in many respects from larger enterprises. Smaller private enter-
prises are associated with advantages as well as disadvantages. There are broad differences
between smaller and larger enterprises with regard to:
? firm structure,
? management and control,
? operations/production,
? resources,
? strategic planning,
? the market, and
? the business environment,
each of which are briefly discussed in turn, below.
Some smaller entrepreneurial firms are highly flexible because they have loose firm struc-
tures. Many smaller enterprises do have an organisational hierarchy, and there is a focus on
informal communication within the organisation. A loose structure can generate the fol-
lowing advantages for some smaller private enterprises:
? focus on imagination, creativity, flexibility and/or the ability to make quick decisions to
seize opportunities;
? no agency problems because ownership and management are aligned;
? easy access to the owner can generate speed and flexibility in decision-making;
? everyone involved and motivated in the organisation;
? ‘family’ unit and people are not numbers;
2.2 Challenges of entrepreneurial firms
19
? structure easy to change in response to changing external environmental conditions;
? no need for memos and time-consuming meetings; and
? accessible and friendly to outsiders, customers, suppliers, etc.
On the downside, a loose structure can generate the following disadvantages for some pri-
vate smaller enterprises:
? owners may dominate and pursue ‘family’ rather than ‘business’ interests;
? owners may exhibit diminished motivation, blind spots, denial, and/or a focus on
lifestyle issues that may retard enterprising behaviour (see Chapter 3) and firm develop-
ment (see Chapter 14);
? some owners exhibit favouritism with key positions held by ‘family’ members, and this
allocation of managerial positions based on kinship ties rather than ability can retard
firm performance;
? owners resistant to change may be reluctant to sell equity to ‘outsiders’ and to deal with
banks and financial institutions;
? owners seeking to maintain ownership and control may retard venture performance by
being resistant to external monitoring, which could improve firm performance;
? some owners have only one good business idea and they may repeat the recipe that
worked in the past in changed circumstances;
? some owners are not receptive to technological change and emerging market opportuni-
ties; and
? some owners are reluctant to consider and/or apply for external expertise required to
ensure enterprising behaviour and venture development.
The management and control of private smaller enterprises can also be associated with the
following disadvantages, which can retard continued enterprising behaviour and venture
development:
? Some smaller enterprises have a small management team (if they have one at all), and
due to the limited expertise and knowledge of management, the firm may be unable to
key into emerging profitable opportunities because there is insufficient attention given
to imagination, creativity, innovation, spotting gaps in the market, market research, fea-
sibility analysis, reluctance and/or inability to use the latest technologies, and the reluc-
tance or the inability to use ‘external’ professional support.
? In many smaller enterprises, staff have multifunctional roles and firm development can
be retarded if there are no clear lines of responsibility.
? In many smaller enterprises, the management focus on day-to-day fire fighting (produc-
tion) issues, and they do not allocate sufficient time to management thinking that
focuses on the long-term and strategic competitive advantage issues.
? Due to cost constraints and/or limited technical knowledge, some smaller enterprises
use informal systems and procedures, and there can be a reluctance and/or inability to
use more technologically sophisticated formal control tools relating to production,
cashflow, quality, etc., which can retard firm survival and development.
With regard to operations and productions issues, some smaller enterprises can seize busi-
ness opportunities that require low price product or service delivery, flexible service provi-
sion, quick speed of service or product delivery, and a focus on service or product design
and quality (see the example of Coffee#1 in Entrepreneurship in action 2.1). Flexible entre-
preneurial smaller enterprises can provide short production runs for the customers
Chapter 2 Contributions of entrepreneurial firms
20
Entrepreneurship in action 2.1
Welsh-based company Coffee#1 beats big boys to award
It was the growing coffee shop culture in shows like
Friends and Frasier that convinced him to quit invest-
ment banking for cappuccinos and muffins. Now, a
coffee chain founded 10 years ago by a Welsh
entrepreneur, has been named the best in Britain,
beating global competitors like Costa at the Café
Society Awards in London. The chain, which was
founded in Cardiff [in Wales] by James Shapland in
2000, now has 12 branches across South Wales and
South-West England. And Mr Shapland said last
night the key to the firm’s success is limiting itself to
one new shop a year. ‘As a chain, we try not to grow
too quickly or people become anonymous,’ said
Mr Shapland, who set up the business with chair-
man, David Jones, a former Microsoft director from
Bargoed [in Wales] who now lives in Seattle, a city at
the forefront of the global coffee movement. ‘This
can happen with bigger companies. Some global
chains open a new store every six to seven days,
which means they do extremely well in terms of
their profits . . . But we try to make things a little
more intimate and we try to open a shop once a year.
It’s growing but we are people who believe that our
chains, although small and local, will be recognised
with our name out there . . . The likes of Costa and
Starbucks are so powerful with their positions on
the high street and their marketing resources, that
to be able to be recognised on a simple local level is
great. What we are trying to do is offer great coffee
and produce and great service. It’s brilliant that an
independent judge has come in and recognised our
standards.’
Coffee#1 beat the likes of Costa Coffee, Caffé
Gusto, Boston Tea Party and Soho Coffee Company
to the award, which recognises its innovation, stan-
dards and customer satisfaction. It follows success
at the Beverage Service Association awards, where it
also picked up top prize.
Mr Shapland said his staff play a key role in mak-
ing the chain a success. ‘We are very lucky that we
have a sound mix of great people whom we try to
look after,’ he said. Further, ‘I think obviously the
core product needs to stand up. We spend an awful
lot of time developing a good cup of coffee and we
make sure you can taste the coffee, whereas some
competitors offer oversized cups which mean you
cannot taste the coffee . . . We want people to feel
like they have got the value out of their £2 they might
spend on coffee.’ He added: ‘We offer warm and
friendly customer service and we have an apprecia-
tion of customers and we don’t take them for
granted . . . We recognise the need to appreciate
them and try to make people feel special when they
come in – it’s easy to become too manufactured and
sterile . . . Customer loyalty is important to us. We
like to offer a nice, warm cosy environment where
you can sit on comfy sofas and read a good book or
have a chat with your friends . . . It’s easy to have a
cold feel in some of the competitors’ shops and they
can have a dirtiness to them . . . We have clean
tables and toilets. I think these factors make for a
good experience.’
The company has been growing since 2000 and
has featured in the Wales Fast Growth 50 project, an
annual search for the 50 fastest growing companies,
for three of the past four years.
Source: J. McWatt, The Western Mail, 6 March 2010.
‘ignored’ by larger enterprises. However, smaller enterprise performance can be retarded if
the enterprise is associated with one or more of the following production and operations
characteristics:
? smaller enterprises may be associated with few, if any, economies of scale;
? labour intensive rather than a focus on using modern mechanised equipment that can
generate efficiency and productivity benefits;
2.2 Challenges of entrepreneurial firms
21
? limited focus on quality control mechanisms;
? inability to take advantage of bulk buying; and
? inability to carry stocks.
Many smaller enterprises are established and managed by a ‘solo’ entrepreneur. Team
ownership of a venture is usually associated with business activities that require more
substantial human and financial resources, for example, knowledge and technology-based
activities. The human capital (i.e., management and industry know-how, technical and
entrepreneurial capabilities, ability to secure resources, prior business ownership experi-
ence, etc.) of the founding entrepreneur (see Section 4.2.2), or the entrepreneurial owner-
ship team, can shape enterprising behaviour as well as business survival and development
(Matlay and Westhead, 2005). Smaller private enterprises associated with ‘solo’ entrepre-
neurs generally have more limited pools of skills, capabilities and knowledge to draw upon
to create, spot and seize profitable business opportunities. Many smaller enterprises are
disadvantaged because they have small management teams with few or no specialists.
Many cash-strapped smaller enterprises have no or limited capacity to develop staff using
job-related formal training due to ‘ignorance’ and/or ‘market’ forces reasons (Storey and
Westhead, 1997). The inability of entrepreneurs to invest in training people in the smaller
enterprises can retard imagination, creativity and innovative behaviour as well as firm
development (Cosh et al., 1998).
New firms are generally financed by entrepreneurs who utilise their own (limited) per-
sonal savings. Smaller private enterprise survival and development can be retarded by a
lack of finance and/or poor cashflow control. Entrepreneurs with no proven track record in
business (i.e., they lack credibility) find it difficult to obtain external finance, particularly if
the entrepreneur fails to provide complete information in a business plan relating to the
risk (i.e., current and future size of the market size, current and future competitive and leg-
islative threats, etc.) and return issues that need to be considered by financiers. Entrepre-
neurs with limited collateral (i.e., a house) may be denied finance and/or charged very high
interest rates with regard to any bank finance provided. Very few smaller enterprises are
able to attract venture capital from formal venture capital firms, or even ‘business angels’,
because they have limited growth prospects. Mistakes relating to financial management
(i.e., high gearing, cashflow problems, over-trading, inability to reduce the problem of
trade bill late payment, etc.) in smaller enterprises can be expensive, and can lead to busi-
ness closure.
Strategic planning to achieve long-term competitive advantage is usually exhibited by
larger enterprises, but this is often absent in smaller enterprises. Many smaller enterprises
solely focus on low price competition alone to satisfy immediate customer demand.
Smaller enterprises are generally associated with the following features, which can retard
enterprising behaviour, firm survival and development:
? limited knowledge of the business environment;
? no specialist staff;
? no time for planning;
? short, if any, planning horizon;
? survival/lifestyle perspective rather than a growth perspective;
Chapter 2 Contributions of entrepreneurial firms
22
? reactive rather than a proactive stance to the external environment; and
? short-term opportunistic stance rather than a long-term strategic competitive advantage
stance.
External environmental conditions shape enterprise behaviour as well as firm survival and
development (see Chapter 11). Smaller enterprises generally have a limited market share.
They also typically have the following features, which can retard firm development:
? small product range;
? limited number and range of customers (especially at business start-up);
? dependence on a single customer or small number of customers;
? limited influence on their market; and
? a tendency to resist change.
With regard to the business environment, smaller enterprises generally perceive the follow-
ing constraints on business development:
? a business environment hostile to smaller enterprises;
? have no influence on credit/discounts with suppliers;
? have no or little credibility with financial institutions;
? believe they are overwhelmed by government regulation, legislation and paperwork;
? are unaware of most direct (and indirect) government assistance to support smaller
enterprises; and
? reluctant to use (and pay) for professional external private and/or public sector advice
and support.
Smaller enterprise owners typically blame mistakes on events in the external environ-
ment (i.e., attribution theory) rather than mistakes made by themselves. Some owners
of smaller enterprises are reluctant to admit mistakes and to learn from their mistakes.
To minimise their exposure to risk in the external environmental, many owners of
smaller enterprises focus on business survival, independence and/or lifestyle issues
rather than the pursuit of rapid business growth, which can involve higher risk exposure
as well as more resources and knowledge to be invested by the entrepreneur. Conse-
quently, many surviving small enterprises remain small. Whilst smaller enterprises are
associated with numerous advantages, which can be leveraged to ensure competitive ad-
vantage, they are also generally associated with several disadvantages relating to firm
structure, management and control, operations/production, resources, strategic plan-
ning, the market, and the business environment. Practitioners may intervene to reduce
the problems faced by smaller enterprises to facilitate the wider benefits associated with
creative, innovative, flexible and dynamic and opportunity seeking smaller private
enterprises.
2.2.3 Barriers to new and small firm growth
Some new and small firms want to grow but they may be blocked by attitudinal, resource,
operational and strategic barriers to business development (see the example of Human
2.2 Challenges of entrepreneurial firms
23
Genome in Entrepreneurship in action 2.2). Practitioners, therefore, focus on business
development issues facing new and smaller firms.
Firms may face market resource barriers to business development (i.e., access to informa-
tion, finance, premises, training, skills, compliance costs associated with statutory and regu-
latory administration, etc.) (Bridge et al., 2003; DTI, 2004) (see Case 2, Fickle Rooster
Productions: Turning a hobby into a profitable business). Barriers that prevent a level play-
ing field can be termed ‘market failures’. Some entrepreneurs face market failures that can
impede business formation and development (Johnson, 2007). The concept of market
failure is the notion that markets cannot always be relied upon to deliver outcomes that are
optimal from society’s perspective. Where this is the case, there may be a role for govern-
ment intervention. Intervention will seek to foster the government’s enterprise policy objec-
tives (i.e., wealth creation and job generation and reduction in social inequality). It can also
be viewed as a vote-enhancing strategy to maximise a government’s chances of re-election.
Many governments encourage private sector organisations to address the barriers faced by
new, small and growing firms. For example, property developers are encouraged to provide
premises and these sponsored environments can increase the flows of resources to new and
growing firms (see Chapter 11) (see the example of Evans Easyspace in Entrepreneurship in
action 2.3).
Entrepreneurship in action 2.2
Human Genome: Barriers to firm growth
Human Genome [a fictitious name] emerged from
work done by a biomedical scientist who designed
new protein molecules based on an industry spon-
sored research project. The scientist realised that
he had created a set of new protein molecules that
could combat a particular viral infection in humans.
Patents were filed for the new invention. The scien-
tist, however, did not know how to exploit the innova-
tion. This novice entrepreneur with no prior business
ownership experience to leverage needed to recruit
a team of advisors from industry to guide his new
firm formation and development decisions. Due to
his reluctance to let go of some of the equity in the
business idea as well his limited social capital, the
scientist found it was difficult to assemble a team
with the skills, capabilities and knowledge to exploit
the new technology. In part, due to resource con-
straints, the scientist began working in his company
on a part-time basis. Funding was needed for a clini-
cal trial. The inexperienced novice entrepreneur who
did not have a successful track record in business
was unable on his own to secure external finance
from private venture capital firms. A business plan
was subsequently written with the team of advisors
from industry, and it was used to secure public fund-
ing for early stage clinical trials. The new ownership
team continued to develop the technology and they
discovered new and more lucrative market applica-
tions. A new chairman and chief executive officer
(CEO) joined the board to help commercialise the
technology. The team learned how to professionally
present the potential rewards (and reduce the
risks) associated with the opportunity to potential
investors. Notably, they conducted additional market
research, attracted high quality human capital, and
acquired a valuable portfolio of patents. The earlier
inability of the founding scientist entrepreneur to
develop the firm’s human and technological re-
sources, therefore, had a knock-on effect in reducing
the firm’s ability to obtain venture capital.
Source: Vohora et al., 2004.
Chapter 2 Contributions of entrepreneurial firms
24
Entrepreneurship in action 2.3
Evans Easyspace: Provision of flexible premises
to encourage new firm formation and growth
Evans Easyspace, the Leeds-based provider of flexi-
ble workspace for the SME market, has entered into
a new deal with European bank Eurohypo AG. The
agreement sees an increased facility of up to £150m,
more than double that previously available, to sup-
port the plans Evans Easyspace has in place for
growth over the next five years. This growth will be
achieved through new build, refurbishment and
acquisition of existing sites and with more than
50 business centres open or under construction
across the UK, Evans Easyspace is aiming to achieve
a £500m portfolio by 2012. Easyspace is 75 per cent
owned by the Evans Family Trust and 25 per cent is
held by the Kodak Pension Plan. Michael Evans, the
Monaco-based chairman of Leeds-based Evans
Property Group, established the company. Bradley
Cooper, finance director of Evans Easyspace, said,
‘The Evans Easyspace winning concept of easy-in,
easy-out terms has been proven across Scotland,
the North and Midlands, demonstrating the contin-
ued demand for flexible accommodation tailor-made
to suit small and growing businesses.’ Further,
he commented, ‘Evans Easyspace has a clear
programme in place for development over the next
five years, with wide scope for nationwide expansion
including the South and Ireland, which reflects our
confidence in the Evans Easyspace brand.’
Source: D. Parkin, Bank Deal Boost for Development Plans,
Yorkshire Post, 28 June 2007.
2.3 Policy to support enterprise
2.3.1 Context
In the light of the gap between the importance of entrepreneurial firms and the challenges
to their ability to realise their potential, various policy initiatives have been introduced.
The objectives of enterprise policy may relate to growth in employment, wealth creation,
improved innovation and technology diffusion and/or competitiveness as well as reducing
social exclusion and regional inequality (Storey, 1994; DTI, 2004) (see the example
of A big help for small businesses: Borough businesses benefit from grant scheme in
Entrepreneurship in action 2.4). Debate surrounds the pros and cons (Mole et al., 2008)
associated with publicly supported intervention to alleviate market failures faced by some
entrepreneurs and firms. Most governments in OECD countries provide advisory services to
enable entrepreneurs to circumvent attitudinal, resource, operational and strategic barriers.
For example, support for enterprise in the United Kingdom has evolved through marked
phases (Bennett, 2008). Business Link Operator franchises have encouraged Regional Devel-
opment Authorities (RDAs) in England and Wales to provide consultancy support. Decen-
tralised local business support (Bennett and Robson, 2003) has been provided by local
enterprise companies (LECs) in Scotland. Local support agencies are encouraged to increase
market penetration (i.e., contact more entrepreneurs and smaller firms) and to report high
customer (i.e., entrepreneur) satisfaction (DTI, 2004) with the impartial diagnostic advice
provided to local people and local businesses (Chancellor of the Exchequer, 2004). The
2.3 Policy to support enterprise
25
British government has realised the need for a balanced policy agenda (DTI, 2004), and is
encouraging business formation by novice entrepreneurs with no prior business ownership
experience, as well as supporting some existing entrepreneurs and the growth of some
‘types’ of existing firms. Although local enterprise agencies are seeking firms with employ-
ment and wealth generation potential (Mole et al., 2008), support is potentially available to
all types of entrepreneurs and firms, irrespective of their growth ambitions. Government
also recognises the need to provide targeted assistance for ‘special groups’ of entrepreneurs,
such as women and people from ethnic minorities (DTI, 2004).
2.3.2 Intervention to address barriers (and market failures) to new
and small firm growth
To encourage new firm formation and business development, government may provide
‘hard’ (i.e., financial assistance and premises) (see Chapters 6 and 12) and/or ‘soft’ assistance
(i.e., education and training) to enable entrepreneurs and firms to address barriers (or ‘mar-
ket failures’) (see the example of Scotland’s Birth Rate Strategy to encourage new firm cre-
ation in Entrepreneurship in action 2.5). Intervention is associated with costs and the
benefits of the intervention should not solely accrue to the recipients (i.e., supported entre-
preneurs and firms). There is no guarantee that intervention will address a ‘market failure’
and generate positive externalisers (i.e., the benefits of the intervention should outweigh the
Entrepreneurship in action 2.4
A big help for small businesses: Borough businesses
benefit from grant scheme
Small and medium sized enterprises (i.e., firms with
250 or less employees and an annual turnover of less
than 40m Euros (£27.9m as at January 2005)) in
Knowsley, Merseyside [in England] can apply to the
council for an Industrial Improvement Grant (IIG) for
projects creating or protecting jobs. Recently there
have been several examples of how this cash has been
used to create jobs in the borough. These include:
Mainsway Limited
This skip hire and building waste recycling business
has been operating from a site in St Helens for over
30 years. After acquiring 5.5 acres of a former land-
fill site in the centre of Huyton Business Park, the
company will be investing heavily to construct a pur-
pose built facility. The council has approved an IIG to
assist the company in their project and the creation
of 14 new jobs.
WG Wholesale/Distribution Ltd
A new start business that has successfully applied
for an IIG to help make improvements to the car
park and hard-standing area of a 30,000 square feet
unit in Yardley Road, Kirkby. With this assistance the
company intends to create 18 new jobs.
Alphasonics Ltd
An industrial cleaning equipment manufacturer
based in Caddick Road, Knowsley. The company has
been awarded an IIG to help with the costs of an
extension to their 6,000 square feet premises. Six
new jobs will be created.
Source: Knowsley Economic Forum, Business Know How, Jobs
for Knowsley, Spring 2005.
Chapter 2 Contributions of entrepreneurial firms
26
Entrepreneurship in action 2.5
Scotland’s Birth Rate Strategy (SBRS): Entrepreneurship
policy delivery
Description of the approach
In 1993, Scotland Enterprise (SEn) – the govern-
ment’s economic development agency for lowland
Scotland – launched the Scottish Business Birthrate
Strategy (SBRS). It set an ambitious target to close
the gap in the business birth rate between Scotland
and the rest of the United Kingdom by the year 2000.
Six priorities of the SBRS
? Unlocking the potential: persuading more people
in Scotland to set up businesses – including
building enterprise into the education system,
at both school and university levels.
? Improving the environment: making Scotland a
more encouraging place for entrepreneurs by im-
proving formal and informal support networks.
? Improving access to finance: helping potential en-
trepreneurs gain access to appropriate funding to
develop their businesses – including venture cap-
ital, business angel capital, and bank finance.
? Widening the entrepreneurial base: unlocking the
untapped potential among women, the under-35s
and non-home owners – all under-represented
among Scotland’s entrepreneurs.
? Increasing start-ups in key sectors: generating more
new firm start-ups in key industries, such as man-
ufacturing, high-technology and business services.
? Increase the number of fast-growing new starts:
increase the number of new firm start-ups that
achieve substantial growth, across all sectors.
Implementation of the strategy
SEn and their partners implemented the SBRS
through a variety of initiatives. These included: Per-
sonal Enterprise Shows to encourage more people
to consider starting businesses; new materials to
support enterprise education in schools; the
Prince’s Scottish Youth Business Trust; the Higher
Education Entrepreneurship Programme; new busi-
ness network groups; and easier access to improved
advisory services and finance. SEn expenditure on
the strategy was in the order of £20 million per year.
Policy re-focus after an evaluation of the SBRS
The SBRS had the following goal:
The objective is for Scotland to at least equal the UK
average of the annual number of new businesses
created per head of population by the end of the
1990s. This currently implies that Scotland would
achieve a 50% increase in the number of new busi-
nesses started every year by the end of this decade.
This would involve the creation of an additional
25,000 businesses by the year 2000.
The SBRS failed to achieve this over-optimistic tar-
get. After a major review of the strategy, the SEn
adopted a more focused approach to entrepreneur-
ship in February 2002. The new approach had the
following three main priorities:
? Encourage innovative high-growth new starts-ups,
increase the number and value of high-growth
start-ups, including start-ups in technology-based
sectors; this involved the establishment of a new,
specialist unit to support ‘high growth’ start-ups.
? Encourage more people to start businesses, by
providing quality ‘volume’ business support serv-
ices, mainly through the Business Gateway
(including specific support and targets for more
start-ups by women, the young and individuals
from socially excluded groups).
? Increase the contribution of education to the devel-
opment of entrepreneurship: develop enterprise
among young people, school and university stu-
dents, and socially excluded groups. The establish-
ment of a High Growth Start-Up Unit (HGU) was at
the core of the focus on those start-ups with the
greatest potential. It focused on technology-based
starts with potential to reach a £5m valuation after
three years. It offered intense, high-value support,
with a focus on intellectual property (IP), fund-
raising, leadership, routes to market. It was closely
linked to external networks.
Over recent years, Scottish Enterprise has developed
a suite of investment programmes (and an invest-
ment readiness programme) in conjunction with
2.3 Policy to support enterprise
27
costs of intervention and the recipients of the intervention should not solely benefit). Inter-
vention may lead to the problem of ‘government failure’ (i.e., government funding supports
entrepreneurs and firms that do not require assistance and whose behaviour is not positively
affected by the assistance) (Johnson, 2007). Rather, intervention should address areas of
‘market failure’ where public initiatives contribute to additionality by encouraging actions
that would not otherwise have been undertaken (i.e., input additionality), contributing to
better results than would otherwise have been achieved (i.e., output additionality), or
changing behaviour in a desired direction (i.e., behavioural additionality) (OECD, 2006;
Clarysse et al., 2009). The array of macro and micro-level of types of intervention are
discussed elsewhere (Storey, 1994; Bridge et al., 2003; DTI, 2004; Johnson, 2007).
2.3.3 Scepticism surrounding policy towards new and small firms
There is scepticism surrounding the value of ‘external assistance’ to new and small firms
(Bridge et al., 2003). Flynn (1993) has warned that schemes supporting new firm formation
may encourage negative selection (i.e., non-survival attributes being transferred to the next
generation of firms), and the survival of competitively weak organisations. Subsidies may
bring about a major bias in the process of market selection that hampers post-entry scale
adjustment of new firms. Holtz-Eakin (2000) has questioned whether smaller firms need
special policy help. He asserts that public policies should be devoted to developing an envi-
ronment favourable to innovation, employment and growth in the economy as a whole,
rather than support to particular types of smaller firms.
2.3.4 Need to monitor intervention and issues with blanket support
Nevertheless, governments are seeking to directly and indirectly support an enterprise cul-
ture (OECD, 1998). Numerous agencies on the ground are seeking to assist the formation
and development of different types of smaller firms. British government policy, for example,
has moved from encouraging new firm formation and self-employment, toward supporting
growing firms, and more recently to a more balanced policy agenda (DTI, 2004). An inter-
vention needs to be monitored with regard to the following issues (Storey, 1994, 2006):
? effectiveness (i.e., extent to which an intervention achieved its aim);
? efficiency (i.e., the amount of direct output that the inputs achieved);
? additionality (i.e., the net benefit that accrued due to the intervention, whether intended
or not, which would not otherwise have accrued);
? deadweight (i.e., ‘what would have happened anyway without the measure’ because some
people would have started their own businesses even if the intervention had not been
available);
private sector providers. In addition to the high
growth focus, there has been a continued effort to
encourage more people to start businesses. This is a
major component of the work of the revamped
Business Gateway, which provides an easy point of
access for existing and potential businesses.
Source: Scotland’s Birth Strategy: Entrepreneurial Culture and
Attitudes, Entrepreneurship Policy Delivery, Charlie Woods,
www.oecd.org/dataoecd/10/54/40352714.pdf.
Website:http://www.scottish-enterprise.com/sedotcom_home/
about_se/research-andpublications/business_birthrate_
strategy.htm.
Chapter 2 Contributions of entrepreneurial firms
28
? displacement (i.e., how much of the gain in one area is offset by losses elsewhere – a sup-
ported firm (i.e., job gain) may take the market share of a firm that has not been sup-
ported (i.e., job loss);
? multiplier effects (i.e., additional benefits from the indirect side-effects of intervention).
‘Blanket support’ allocated to anyone, irrespective of need, ability or previous propensity to
use external publicly supported support can be questioned. To maximise returns on public
policy investments, attempts have been made to ‘target’ external support to ‘winning firms’,
that is, businesses with significant wealth creation potential (Storey, 1994; Westhead, 1995).
This has been linked, for example, to a focus on policies targeted at stimulating sectors with
the capacity to be world leaders to fulfil their potential, and ensuring that emerging tech-
nologies become future growth sectors (Mustar and Wright, 2009). Surprisingly, the char-
acteristics and behaviour of ‘winning entrepreneurs’ have been relatively neglected
(Westhead et al., 2005a) (see Chapter 5).
2.3.5 The entrepreneur as the unit of academic and policy analysis
External support is primarily provided at the level of the individual entrepreneur during the
firm start-up process. After the firm initiation hurdles have been addressed and the firm has
commenced trading, external support for enterprise becomes more focused on the needs of
different types of firms (i.e., high-technology, family, exporting firms, etc.) (see Chapters 6,
7 and 13). There may be a need to focus upon the entrepreneur, rather than the firm alone,
throughout all stages of the entrepreneurial process. Certain types of entrepreneur may re-
quire specific (and customised) types of assistance (see Chapters 5 and 6). Analysis of the het-
erogeneity of entrepreneurs may contribute toward the development of policies tailored to
different types of entrepreneur, rather than the provision of broad ‘blanket’ policies to all
types of entrepreneur, irrespective of need or ability (Westhead et al., 2005a).
In considering the entrepreneur as a unit of policy analysis, it is necessary to appreciate
that entrepreneurs are not a homogeneous entity with regard to their human capital pro-
files, motivations, resources, behaviour and performance. An increase in the number
(stock) of businesses in an economy may not necessarily be a reliable indicator of the devel-
opment of entrepreneurship (Westhead and Wright, 1999). This is because different types
of entrepreneur own both new and established businesses. Practitioners monitoring the
growth in the supply of new firms need to be aware that habitual (i.e., serial and portfolio)
entrepreneurs with business ownership experience own a sizeable proportion of new firms.
Studies that judge the scale of entrepreneurship in terms of the number of new firms, but
ignore the scale of serial and portfolio entrepreneur activity may overestimate the gross
number of entrepreneurs, and underestimate the contribution made by particular ‘types’ of
entrepreneur (Westhead and Wright, 1998a) (see Chapter 5).
2.4 Looking forward
This chapter has highlighted the economic and non-economic contributions associated
with encouraging new firm formation and business development. Barriers to business
formation and development were summarised, and a case for practitioner intervention to
address barriers (i.e., market failures) to new private firm formation and business
Recommended further reading
29
development were summarised. The need to focus on the entrepreneur and the firm as units
of analysis in academic and policy studies was raised. In Chapter 3, we discuss ‘what entre-
preneurs do’ with regard to the entrepreneurial process. With reference to economic
approaches we discuss entrepreneurial inputs, processes and events. The following five
themes are highlighted with regard to the views of leading economists: imagination and cre-
ativity: new ideas, products and businesses (Theme 1), new combinations, radical innova-
tion, new industries and economic development (Theme 2); opportunity identification,
evaluation and pursuit: demand, supply and arbitrage (Theme 3); functions and judgements
of entrepreneurs (Theme 4); and entrepreneurial business: knowledge management, incre-
mental innovation, and resource assemblage and leverage to exploit an opportunity
(Theme 5).
Discussion questions
1 The promotion of entrepreneurship is seen as a means of combating
unemployment and poverty (Storey, 1994). Critically evaluate the contributions
of new and growing firms.
2 Why should policy-makers and practitioners intervene to support enterprise?
3 Should policy-makers and practitioners solely focus on increasing the supply of
entrepreneurs and new firms?
4 What challenges would practitioners be likely to face in implementing policy
support toward entrepreneurs rather than firms?
5 Should practitioners provide support to under-represented (and/or special)
groups?
6 Should practitioners provide ‘blanket support’ to all entrepreneurs and firms?
7 Should practitioners ‘target’ support to ‘winners’?
Recommended further reading
Clarysse, B., Wright, M. and Mustar, P. (2009). Behavioural Additionality of R&D Subsidies:
A Learning Perspective, Research Policy, 38 (10): 1517–1533.
Department of Trade and Industry (DTI). (2004). A Government Action Plan for Small Business.
Making the UK the Best Place in the World to Start and Grow a Business: The Evidence Base.
London: DTI, Small Business Service.
Holtz-Eakin, D. (2000). Public Policy Toward Entrepreneurship. Small Business Economics,
15 (4): 283–291.
Johnson, P. (2007). The Economics of Small Firms. London: Routledge.
Storey, D. J. (1994). Understanding the Small Business Sector. London: Thomson Learning.
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