Description
With this brief outline relating to psychology of entrepreneurship intensive programme.
“Psychology of Entrepreneurship”
Intensive Programme (ERA-IP-2010-04)
1
Ways to become an Entrepreneur
Prague, 19.7.2011
Martina Jakl, PhD
Outline
The entrepreneurial process
Individual – new venture creation dialogic
Forms of entrepreneurship
2
Forms of entrepreneurship
Starting from scratch
Measuring entrepreneurial
activity:
results from GEM 2006
estimated parameters fitted line:
y = -5E-15x
3
+ 6E-10x
2
- 2E-05x + 0.2741
R
2
= 0.4239
20%
25%
P
e
r
c
e
n
t
a
g
e
o
f
p
o
p
u
l
a
t
i
o
n
b
e
t
w
e
e
n
1
8
-
6
4
y
e
a
r
s
Early-stage Entrepreurial Activity (TEA rate) 2006
TEA rate United Arab Emirates
Fitted polynomial (3rd order) - Arab Emirates excluded
Note: Peru not shown in this graph
CN
ID
JA PH
CO
3
source: GEM Global Report 2006
R = 0.4239
0%
5%
10%
15%
0 10'000 20'000 30'000 40'000 50'000
GDP per Capita 2006, in Power Purchasing Parities (PPP)
P
e
r
c
e
n
t
a
g
e
o
f
p
o
p
u
l
a
t
i
o
n
b
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t
w
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e
n
1
8
-
6
4
y
e
a
r
s
ES
US
IS
DK
AU
CA
FI
BE
SE
DE
JP
NL
FR
UK
IT
SI
GR CZ
HU
AR
MY
HR
CL
LV
SA
RU
MX
TR
SG
UY
IN
BR
TH
AE
IE
NO
Necessity or opportunity
based entrepreneurship?
50%
60%
70%
80%
90%
100%
4
0%
10%
20%
30%
40%
50%
N
e
w
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Opportunity Necessity Combination of motives
source: GEM exec. Report Switzerland 2005
The process of new venture
creation
Not all individuals have the potential to launch a business
venture. . .
And of those of do, not all will attempt a founding. . .
Of those who attempt, not all will succeed in founding
5
Of those who attempt, not all will succeed in founding
Being an entrepreneur or
becoming an entrepreneur?
6
What‘s your opinion?
The bright side of
entrepreneurship: advantages
of being an entrepreneur
Autonomy
be my own boss; work my own hours; work with the
people that I like, at a location of my choice
Money
7
Money
make more money; keep the proceeds of the business;
reward according to the effort
Creativity
use my own talents; desire to create something; control
from begin to end; passion about what I am doing
Source: Thierry Volery
The dark side of entrepreneurship:
the risks of being an entrepreneur
Financial risk
in most of new ventures the individuals puts a significant
portion of his or her savings at stake
Career risk
Entrepreneurs may be enable to find a job or go back to
their old job if their venture should fail
8
their old job if their venture should fail
Family and social risk
Starting a new venture uses much of the entrepreneur’s
energy and time. Consequently, his or her other
commitments may suffer
Health risk
Psychic and physical pressures
Source: Thierry Volery
The entrepreneurial process
opportunity
Recognition Evaluation Exploitation
9
Existence of
opportunities:
• Economic
disequilibrium
• Asymmetric
information
Existence of
opportunities:
• Economic
disequilibrium
• Asymmetric
information
Main influences:
• Proprieties of
opportunities
• Individual
differences
Main influences:
• Proprieties of
opportunities
• Individual
differences
Forms of
exploitation
• Market
solution
• Institutional
solution
Forms of
exploitation
• Market
solution
• Institutional
solution
Recognition of
opportunities:
• Cognitive
abilities
• Prior
knowledge
Recognition of
opportunities:
• Cognitive
abilities
• Prior
knowledge
Source: Fueglistaller et. al., Entrepreneurship, page 9
100 founders from „Inc.“ 500 fastest growing private companies
5%
20%
4%
By incident
e.g. own needs
Development of an
IT-Revolution
Systematic search
for opportunities
Where do entrepreneurs get their
ideas?
10
71%
Copy or modification
of an idea from a
previous employment
Development of an
idea of a family
member. Continuation
of a temporary job
source: Bhidé, HBR, 1994
The business idea I
Many ideas are obvious – in a retrospective view, but the
space available for choices and decisions is less obvious in
the beginning
The „discovery“ of business ideas involves a visionary
component and belongs to a certain mindset of the
entrepreneur and may include radical new components
11
entrepreneur and may include radical new components
Other people, even experts, can have problems to
understand these thoughts
source: Marc Gruber
The business idea II
and how some experts went wrong…
• „The phonograph ... is not of any commercial value.“
Thomas Alva Edison Edison, inventor of the phonograph, 1880.
• „Who the hell wants to hear actors talk?“
H. M. Warner, Warner Brothers, 1927.
• „I think there is a world market for about five computers.“
Thomas J. Watson, chairman of IBM, 1943.
12
Thomas J. Watson, chairman of IBM, 1943.
• „640K ought to be enough for anybody.“
Bill Gates, Microsoft, 1981.
• „There is no reason for any individual to have a computer in their
home.“
Ken Olsen, Digital Equipment Corp.
• „Man will not fly for 50 years.“
Wilbur Wright in 1901, two years before the famous flight.
source: Marc Gruber
…but please avoid those
kind of terms
We have no competition…
Our management team has a great deal of
experience…
Customers are clamouring for our product…
13
Customers are clamouring for our product…
We conservatively project…
source: Sahlman, 1997
The individual - new value
creation dialogic
The opportunity that is pursued by individuals
becomes an entrepreneurial project and a process of
new value creation is initiated
The relation individual ?new value creation as a
dialogic, or a system with a circular causality process
14
dialogic, or a system with a circular causality process
This dialogic means that the individual can be called
an entrepreneur only because s/he is pursuing a
project to commercialise a new product or service,
and in turn, that this entrepreneurial project exists
only because there is an individual who has identified
this opportunity and is pursuing it
Source: Thierry Volery
Entrepreneurial outcomes based
on the dialogic concept
Entrepreneurship is concerned first and foremost
with a process of change, emergence and value
creation in the market, but also, at the same
time, change and creation for the individual.
15
time, change and creation for the individual.
Drawing from these two dimensions, there are 4
entrepreneurial outcomes:
Entrepreneurial reproduction
Entrepreneurial imitation
Entrepreneurial valorisation
Entrepreneurial venture
Source: Thierry Volery
A typology of
entrepreneurial outcomes
Entrepreneurial
imitation
Entrepreneurial
venture
A
l
o
t
16
Entrepreneurial
reproduction
Entrepreneurial
valorisation
Individual ? ?? ?New value creation
New value creation / change for the environment
Little A lot
L
i
t
t
l
e
Source: Thierry Volery
Forms of entrepreneurship
The creation of an independent start-up is only one way of
becoming an entrepreneur.
Depending upon the levels of independence or innovation,
several forms of entrepreneurship are possible:
17
Strategic renewal
Acquisition / takeover
Corporate venturing
Independent start-up
Source: Thierry Volery
Forms of entrepreneurship
Strategic renewal
Corporate
venturing
Break up of existing
Level of innovation
L
e
v
e
l
o
f
i
n
d
e
p
e
n
d
e
n
c
e
_
+
Internal start-up
18
Acquisition/
Take over
Independent
start-up
structure (new division)
L
e
v
e
l
o
f
i
n
d
e
p
e
n
d
e
n
c
e
+
Internal start-up
(new subsidiary)
Franchise
Spin off
Joint venture Capital risk initiative
in an established
corporation
Source: Thierry Volery
Strategic Renewal
significant changes to an organization's business or
corporate level strategy or structure
advantages
+ entrepreneurship in form of a well defined project
19
+ entrepreneurship in form of a well defined project
+ energy boost for the organization
disadvantages
- low degree of freedom
- project has an end
Acquisition / Take over
acquisition of an enterprise by an individual
advantages
+ already established on the market
20
+ already established on the market
+ no energy needed in starting a business
disadvantages
- taking over existing culture and staff
- High amount of capital needed
Corporate Venturing
creation of internal start-ups to develop,
produce, and market new products or services
advantages
+ backing from the organization (eg financially)
21
+ backing from the organization (eg financially)
+ profiting from an existing name
disadvantages
- low degree of freedom
- Depending on the parental organization
Independent Start-up
launch of a new and independent business
venture by an individual
advantages
+ + high degree of freedom
22
+ + high degree of freedom
disadvantages
- Liabilities of newness and smallness
- High personal risk associated
Forms of entrepreneurship
Which form would you choose
for your career as an entrepreneur?
23
Starting from scratch
International comparison in starting a business
Reasons for giving up the venture
Starting from scratch – in a ideal way
Evaluation of a business idea
24
Evaluation of a business idea
What would you do?
International comparison in
starting a business
Procedures (number) Procedures (number) 10 10 66 99 77 99
CZ CZ CH CH AA FF DD
25
Procedures (number) Procedures (number)
Min. capital
(% GNI per capita)
Min. capital
(% GNI per capita)
Costs
(% GNI per capita)
Costs
(% GNI per capita)
Duration (days) Duration (days)
10 10
39 39
9.5 9.5
40 40
66
31.3 31.3
8.7 8.7
20 20
99
61.5 61.5
5.7 5.7
29 29
77
00
1.2 1.2
88
99
47.6 47.6
4.7 4.7
24 24
Source: World Bank, 2005
Reasons for giving up the
venture
Financial problems (68,6%)
Lack of information (48%)
Lack of qualification (48%)
Deficits in planning (30,1%)
26
Deficits in planning (30,1%)
Family problems (29,9%)
Overestimation of own resources (20,9%)
Influences from outside (15,4%)
(Source: Untersuchung der Deutschen Ausgleichsbank)
Starting from scratch –
in a ideal way
Finding office space
Operative start
Second finance round
Product introduction and first customers
Growing own capital
Establishing the business / IPO
27
Idea
Kitchen table
„Commitment“ of key persons
Ending previous employment
Writing a business plan
Establishing management team
Seed Capital
„Closing the deal“
Finding office space
(source: Marc Gruber)
can we offer a product or service? can we offer a product or service?
idea
need need
is there a market is there a market
Evaluation of a business
idea
28
is it worth it? is it worth it?
organizational & financial planning organizational & financial planning
overall strategy overall strategy
product product
can it be a success? can it be a success?
risks associated risks associated
(source: Amit)
What would you do? –
Case A
Imagine yourself in the second year of your studies.
Almost every Sunday morning you are learning together
with your friends, but one thing is missing: fresh
croissants!
29
croissants!
You have the idea of starting a delivery service for
croissants and fresh orange juice on Sundays.
Would you start the business? What would be the
pro’s and con’s?
What would you do? –
Case B
You are in a entrepreneurship course and have to write a
business plan.
By chance you meet a very good scientist with a brilliant
idea on how to revolutionize vaccination, but he does not
know how to write a business plan and his partners
either.
30
either.
After finishing the first version of the business plan, he
asks you to join his team.
Would you join his team? What would be the pro’s
and con’s?
Summary
Opportunities are the basis for the entrepreneurial
process
Individuals and opportunities have a dialogic relationship
Different forms and entrepreneurial outcomes are
possible, independent start-ups are only one possibility
31
possible, independent start-ups are only one possibility
doc_736214373.pdf
With this brief outline relating to psychology of entrepreneurship intensive programme.
“Psychology of Entrepreneurship”
Intensive Programme (ERA-IP-2010-04)
1
Ways to become an Entrepreneur
Prague, 19.7.2011
Martina Jakl, PhD
Outline
The entrepreneurial process
Individual – new venture creation dialogic
Forms of entrepreneurship
2
Forms of entrepreneurship
Starting from scratch
Measuring entrepreneurial
activity:
results from GEM 2006
estimated parameters fitted line:
y = -5E-15x
3
+ 6E-10x
2
- 2E-05x + 0.2741
R
2
= 0.4239
20%
25%
P
e
r
c
e
n
t
a
g
e
o
f
p
o
p
u
l
a
t
i
o
n
b
e
t
w
e
e
n
1
8
-
6
4
y
e
a
r
s
Early-stage Entrepreurial Activity (TEA rate) 2006
TEA rate United Arab Emirates
Fitted polynomial (3rd order) - Arab Emirates excluded
Note: Peru not shown in this graph
CN
ID
JA PH
CO
3
source: GEM Global Report 2006
R = 0.4239
0%
5%
10%
15%
0 10'000 20'000 30'000 40'000 50'000
GDP per Capita 2006, in Power Purchasing Parities (PPP)
P
e
r
c
e
n
t
a
g
e
o
f
p
o
p
u
l
a
t
i
o
n
b
e
t
w
e
e
n
1
8
-
6
4
y
e
a
r
s
ES
US
IS
DK
AU
CA
FI
BE
SE
DE
JP
NL
FR
UK
IT
SI
GR CZ
HU
AR
MY
HR
CL
LV
SA
RU
MX
TR
SG
UY
IN
BR
TH
AE
IE
NO
Necessity or opportunity
based entrepreneurship?
50%
60%
70%
80%
90%
100%
4
0%
10%
20%
30%
40%
50%
N
e
w
Z
e
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a
Opportunity Necessity Combination of motives
source: GEM exec. Report Switzerland 2005
The process of new venture
creation
Not all individuals have the potential to launch a business
venture. . .
And of those of do, not all will attempt a founding. . .
Of those who attempt, not all will succeed in founding
5
Of those who attempt, not all will succeed in founding
Being an entrepreneur or
becoming an entrepreneur?
6
What‘s your opinion?
The bright side of
entrepreneurship: advantages
of being an entrepreneur
Autonomy
be my own boss; work my own hours; work with the
people that I like, at a location of my choice
Money
7
Money
make more money; keep the proceeds of the business;
reward according to the effort
Creativity
use my own talents; desire to create something; control
from begin to end; passion about what I am doing
Source: Thierry Volery
The dark side of entrepreneurship:
the risks of being an entrepreneur
Financial risk
in most of new ventures the individuals puts a significant
portion of his or her savings at stake
Career risk
Entrepreneurs may be enable to find a job or go back to
their old job if their venture should fail
8
their old job if their venture should fail
Family and social risk
Starting a new venture uses much of the entrepreneur’s
energy and time. Consequently, his or her other
commitments may suffer
Health risk
Psychic and physical pressures
Source: Thierry Volery
The entrepreneurial process
opportunity
Recognition Evaluation Exploitation
9
Existence of
opportunities:
• Economic
disequilibrium
• Asymmetric
information
Existence of
opportunities:
• Economic
disequilibrium
• Asymmetric
information
Main influences:
• Proprieties of
opportunities
• Individual
differences
Main influences:
• Proprieties of
opportunities
• Individual
differences
Forms of
exploitation
• Market
solution
• Institutional
solution
Forms of
exploitation
• Market
solution
• Institutional
solution
Recognition of
opportunities:
• Cognitive
abilities
• Prior
knowledge
Recognition of
opportunities:
• Cognitive
abilities
• Prior
knowledge
Source: Fueglistaller et. al., Entrepreneurship, page 9
100 founders from „Inc.“ 500 fastest growing private companies
5%
20%
4%
By incident
e.g. own needs
Development of an
IT-Revolution
Systematic search
for opportunities
Where do entrepreneurs get their
ideas?
10
71%
Copy or modification
of an idea from a
previous employment
Development of an
idea of a family
member. Continuation
of a temporary job
source: Bhidé, HBR, 1994
The business idea I
Many ideas are obvious – in a retrospective view, but the
space available for choices and decisions is less obvious in
the beginning
The „discovery“ of business ideas involves a visionary
component and belongs to a certain mindset of the
entrepreneur and may include radical new components
11
entrepreneur and may include radical new components
Other people, even experts, can have problems to
understand these thoughts
source: Marc Gruber
The business idea II
and how some experts went wrong…
• „The phonograph ... is not of any commercial value.“
Thomas Alva Edison Edison, inventor of the phonograph, 1880.
• „Who the hell wants to hear actors talk?“
H. M. Warner, Warner Brothers, 1927.
• „I think there is a world market for about five computers.“
Thomas J. Watson, chairman of IBM, 1943.
12
Thomas J. Watson, chairman of IBM, 1943.
• „640K ought to be enough for anybody.“
Bill Gates, Microsoft, 1981.
• „There is no reason for any individual to have a computer in their
home.“
Ken Olsen, Digital Equipment Corp.
• „Man will not fly for 50 years.“
Wilbur Wright in 1901, two years before the famous flight.
source: Marc Gruber
…but please avoid those
kind of terms
We have no competition…
Our management team has a great deal of
experience…
Customers are clamouring for our product…
13
Customers are clamouring for our product…
We conservatively project…
source: Sahlman, 1997
The individual - new value
creation dialogic
The opportunity that is pursued by individuals
becomes an entrepreneurial project and a process of
new value creation is initiated
The relation individual ?new value creation as a
dialogic, or a system with a circular causality process
14
dialogic, or a system with a circular causality process
This dialogic means that the individual can be called
an entrepreneur only because s/he is pursuing a
project to commercialise a new product or service,
and in turn, that this entrepreneurial project exists
only because there is an individual who has identified
this opportunity and is pursuing it
Source: Thierry Volery
Entrepreneurial outcomes based
on the dialogic concept
Entrepreneurship is concerned first and foremost
with a process of change, emergence and value
creation in the market, but also, at the same
time, change and creation for the individual.
15
time, change and creation for the individual.
Drawing from these two dimensions, there are 4
entrepreneurial outcomes:
Entrepreneurial reproduction
Entrepreneurial imitation
Entrepreneurial valorisation
Entrepreneurial venture
Source: Thierry Volery
A typology of
entrepreneurial outcomes
Entrepreneurial
imitation
Entrepreneurial
venture
A
l
o
t
16
Entrepreneurial
reproduction
Entrepreneurial
valorisation
Individual ? ?? ?New value creation
New value creation / change for the environment
Little A lot
L
i
t
t
l
e
Source: Thierry Volery
Forms of entrepreneurship
The creation of an independent start-up is only one way of
becoming an entrepreneur.
Depending upon the levels of independence or innovation,
several forms of entrepreneurship are possible:
17
Strategic renewal
Acquisition / takeover
Corporate venturing
Independent start-up
Source: Thierry Volery
Forms of entrepreneurship
Strategic renewal
Corporate
venturing
Break up of existing
Level of innovation
L
e
v
e
l
o
f
i
n
d
e
p
e
n
d
e
n
c
e
_
+
Internal start-up
18
Acquisition/
Take over
Independent
start-up
structure (new division)
L
e
v
e
l
o
f
i
n
d
e
p
e
n
d
e
n
c
e
+
Internal start-up
(new subsidiary)
Franchise
Spin off
Joint venture Capital risk initiative
in an established
corporation
Source: Thierry Volery
Strategic Renewal
significant changes to an organization's business or
corporate level strategy or structure
advantages
+ entrepreneurship in form of a well defined project
19
+ entrepreneurship in form of a well defined project
+ energy boost for the organization
disadvantages
- low degree of freedom
- project has an end
Acquisition / Take over
acquisition of an enterprise by an individual
advantages
+ already established on the market
20
+ already established on the market
+ no energy needed in starting a business
disadvantages
- taking over existing culture and staff
- High amount of capital needed
Corporate Venturing
creation of internal start-ups to develop,
produce, and market new products or services
advantages
+ backing from the organization (eg financially)
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+ backing from the organization (eg financially)
+ profiting from an existing name
disadvantages
- low degree of freedom
- Depending on the parental organization
Independent Start-up
launch of a new and independent business
venture by an individual
advantages
+ + high degree of freedom
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+ + high degree of freedom
disadvantages
- Liabilities of newness and smallness
- High personal risk associated
Forms of entrepreneurship
Which form would you choose
for your career as an entrepreneur?
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Starting from scratch
International comparison in starting a business
Reasons for giving up the venture
Starting from scratch – in a ideal way
Evaluation of a business idea
24
Evaluation of a business idea
What would you do?
International comparison in
starting a business
Procedures (number) Procedures (number) 10 10 66 99 77 99
CZ CZ CH CH AA FF DD
25
Procedures (number) Procedures (number)
Min. capital
(% GNI per capita)
Min. capital
(% GNI per capita)
Costs
(% GNI per capita)
Costs
(% GNI per capita)
Duration (days) Duration (days)
10 10
39 39
9.5 9.5
40 40
66
31.3 31.3
8.7 8.7
20 20
99
61.5 61.5
5.7 5.7
29 29
77
00
1.2 1.2
88
99
47.6 47.6
4.7 4.7
24 24
Source: World Bank, 2005
Reasons for giving up the
venture
Financial problems (68,6%)
Lack of information (48%)
Lack of qualification (48%)
Deficits in planning (30,1%)
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Deficits in planning (30,1%)
Family problems (29,9%)
Overestimation of own resources (20,9%)
Influences from outside (15,4%)
(Source: Untersuchung der Deutschen Ausgleichsbank)
Starting from scratch –
in a ideal way
Finding office space
Operative start
Second finance round
Product introduction and first customers
Growing own capital
Establishing the business / IPO
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Idea
Kitchen table
„Commitment“ of key persons
Ending previous employment
Writing a business plan
Establishing management team
Seed Capital
„Closing the deal“
Finding office space
(source: Marc Gruber)
can we offer a product or service? can we offer a product or service?
idea
need need
is there a market is there a market
Evaluation of a business
idea
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is it worth it? is it worth it?
organizational & financial planning organizational & financial planning
overall strategy overall strategy
product product
can it be a success? can it be a success?
risks associated risks associated
(source: Amit)
What would you do? –
Case A
Imagine yourself in the second year of your studies.
Almost every Sunday morning you are learning together
with your friends, but one thing is missing: fresh
croissants!
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croissants!
You have the idea of starting a delivery service for
croissants and fresh orange juice on Sundays.
Would you start the business? What would be the
pro’s and con’s?
What would you do? –
Case B
You are in a entrepreneurship course and have to write a
business plan.
By chance you meet a very good scientist with a brilliant
idea on how to revolutionize vaccination, but he does not
know how to write a business plan and his partners
either.
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either.
After finishing the first version of the business plan, he
asks you to join his team.
Would you join his team? What would be the pro’s
and con’s?
Summary
Opportunities are the basis for the entrepreneurial
process
Individuals and opportunities have a dialogic relationship
Different forms and entrepreneurial outcomes are
possible, independent start-ups are only one possibility
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possible, independent start-ups are only one possibility
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