Description
Detailed outline in regard to technology entrepreneurial ecosystem structure and entrepreneurial strategies contingency.
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TECHNOLOGY ENTREPRENEURIAL ECOSYSTEM STRUCTURE AND
ENTREPRENEURIAL STRATEGIES CONTINGENCY FACTORS
Lect. dr. Alexandru Roja PhD
West University of Timisoara
Faculty of Economics and Business Administration
Timisoara, Romania
Abstract: One of the most important factors of social and economic
progress now is the information technology. To develop their new
ventures, entrepreneurs need a business environment, we name it
entrepreneurial ecosystem, to generate, validate and implement viable
business ideas, and resources and services to grow the business. The
new venture competitiveness in the field of information technology
depends on the entrepreneurial ecosystem structure and their
components. The relationships arising between the elements of the
technological entrepreneurial ecosystems generate opportunities and
advantages for entrepreneurs and businesses. In our research we
analyze the structure of technology entrepreneurial ecosystems and the
most important contingency factors that influence entrepreneurial
strategies.
JEL classification: L10, L26, M13
Key words: entrepreneurship; strategic management; technology ecosystem;
entrepreneurial strategies; competitivity
1. INTRODUCTION
Information technology is extremely important for social and economic
development and it is the most dynamic area for entrepreneurial ideas. The importance
of entrepreneurship in the field of information technology is related to the impact of
technologies in economy and society. On the other side, entrepreneurs are attracted by
the information technology field because the time for business ideas and products
validation is short and they can go quickly on the market. In the field of information
technology, human resources skills and competences are the most valuable assets, but
the factor that make the difference is innovation. Field of information technology is
characterized by a very high dynamic, business start-ups emergence, and the
opportunity for entrepreneurs to be competitive through a strategic approach.
Research objectives of this research paper was to analyze entrepreneurial
ecosystems structures, the levels and other elements that compose technology
entrepreneurial ecosystem and the most important contingency factors for
entrepreneurial strategy.
The research is based on two main directions as assumptions. The first line of
research is based on the description of technology entrepreneurial ecosystems and its
structure. We were interested to find and analyze the most important components of the
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ecosystem and the levels of information technology industry. The second direction of
research was focused on entrepreneurial strategy contingency factors. For many
entrepreneurs the only compass in their entrepreneurial orientation is still intuition and
not strategy. When they engage in new ventures in the regional ecosystem, they found
few reference points by which to start and grow a startup, a lack of support services to
understand the steps and the skills they need in entrepreneurship and business
management. For that it is important to understand all the contingency factors that can
shape or affect a strategy.
2. TECHNOLOGY ENTREPRENEURIAL ECOSYSTEMS
According to Schumpeter, the most important function of entrepreneurs is to
reform or to reinvent the way in which value is generated by exploiting inventions and
innovation. Business environment is characterized by globalization, increasing use of
knowledge and increasing role of innovation in regional innovation systems and the
importance of technological entrepreneurship as a factor in the wealth creation
generate the emergence of new types of entrepreneurial ecosystems (Camagni, 1995;
Feldman, 1994; Porter, 1990). The reason why some regions are more advanced than
others lies in successful use of new technologies and entrepreneurship fostering in
information technology.
Related to Therin there are several words and definitions used in scientific
articles for entrepreneurship in the field of technology as technology entrepreneurship,
technical entrepreneurship, techno-entrepreneurship and technology entrepreneurial
ecosystems (Therin, 2007).
The most cited authors Dorf and Byers, define technological entrepreneurship
as a style of business leadership that involves identification and human resource high-
potential capitalization, technology-intensive commercial opportunities, managing
accelerated growth and significant risk taking (Dorf and Byers, 2005). In their
definition Shane and Venkataraman see technological entrepreneurship as the
processes of assembling resources, technical systems and strategies by an
entrepreneurial venture to pursue opportunities (Shane and Venkataraman, 2004).
We can analyze technology entrepreneurial ecosystems or technological
entrepreneurship at many levels and from interdisciplinary perspective. We have
identified more than nine key elements of technology entrepreneurial ecosystem: new
technology ventures, communities, universities, corporations, capital and investments,
markets, business sectors, government, professionals, advisors and other components
like incubators, accelerators and hubs.
The most important component of technology entrepreneurial ecosystem is the
entrepreneur itself, and he is the key catalyst in the process of business sectors
emergence and start-ups growth. Technology entrepreneurs have more technical skills
and competences than non-technical ones, and they have to acquire also business and
managerial skills. One important step in the new venture success is the transformation
of the entrepreneurial mind into managerial one. The business will become more
complex and entrepreneurs have to understand the business environment, they need a
vision and a strategy to make competitive the new venture. Technology entrepreneurs
have to understand how the new venture will evolve and the importance of managerial
skills, and most important strategic oriented mindset. The most important three
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motivational factors of the technological entrepreneurs are independence, opportunities
exploitation and value generation (Oakley, 2003). In information technology industry,
the networks between entrepreneurs are enhancers of business life cycle stages.
Continuous learning is important for entrepreneurs and also for managers
because they need to develop their skills and competences and educational institutions
as components of the entrepreneurial ecosystems provide this educational services. The
most important role of universities is the educational one as a supplier of qualified
workforce. Universities can act as a node in the network between corporations,
incubators, research centers, clusters and technology parks. Universities have also an
important role of spin-off generators, when research products or knowledge generate
values in business environment.
Collaboration between universities, research centers, start-ups incubators,
corporations, small and medium enterprises and other regional entities is very
important to foster innovation, know-how transfer and human resource development.
At the regional level, clusters as a form of collaboration between companies can
increase competitiveness of start-ups, and have positive effects on innovation and long
term development. The main role of technological parks, incubators, accelerators and
hubs is to ensure and enhance collaborative and interconnected environment which
increase interaction between communities, resources, ideas and technologies.
Entrepreneurial approaches in information technology industry have become
important sources of value generation and growth in Europe due to the dynamics and
the value that information technology brings in our daily life and in business.
Developed countries have realized the major role that information technology have in
society and in economy. Technology can be harnessed by strategies that encourage,
ensure and accelerate the creation of start-ups in information technology field.
Currently techno-entrepreneurship promises both high profits and high risks for
founders and investors.
For entrepreneurs one of the biggest challenges is to validate the value of
opportunities and business idea before its realization. The main goals of the
entrepreneurial approach is to create and capturing economic value either by
developing new technologies or by exploiting them. To achieve these goals,
entrepreneurs must develop strategies and business models to recreate new dimensions
of socio-economic life beginning from ideas and strategic vision.
The ability to recognize business opportunities is a major skill an entrepreneur
should acquire and it will dramatically shape the future of his venture. To our view,
despite a thorough understanding of the opportunity recognition process, its
determinants of success and failure, quite an important lack of understanding remains
as to appropriate anticipative and proactive approaches. The literature in the fields of
management and entrepreneurship assumes that entrepreneurs are able to anticipate, to
be proactive and to build a credible vision of their business. Proactive thinking is an
important ability of entrepreneurs. They need to understand the business environment
and the influences of entrepreneurial ecosystem components to new venture strategies.
Proactive management enables entrepreneurs to understand and to exploit the first
signs of changes and to develop strategies to minimize risks and maximize competitive
advantage of their businesses.
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Counteracting and minimizing specific risks and negative influences of
business environment dynamics require proactive entrepreneurial strategies and plans
deployments to make startups competitive, or to increase the competitiveness of
existing ones. The relation between entrepreneurs and entrepreneurial ecosystem
components is particularly important in the light of opportunities identification,
information and knowledge acquired and conceptualization of future business value.
Schumpeter (1976) put the emphasis on entrepreneurs as those who, in opposition to
traditional capitalists, engage in new activities or ventures that did not exist before and
in innovative or creative ones. Schumpeter views on entrepreneurship is that
entrepreneurs have to explore new opportunities in order to build a new world order
while deconstructing or destructing the old one. Entrepreneurship can be defined as an
activity and a process involving the discovery, creation and exploitation of
opportunities in order to create value thanks to the introduction of new goods, services,
processes and organizations (Therin, 2007).
The way individuals recognize opportunities for business creation is one of the
first critical abilities in the early stages of the business development process.
Entrepreneurs have to be those people who sense, create and respond to changes and
needs regarding a possible opportunity for profit. The literature review highlights
different approaches of entrepreneurship. Davidson (2004) argue that in practice we
can identify in entrepreneurial ecosystem three main streams of thinking about the
nature of an opportunity: the objective approach in which opportunities do exist in the
environment so that entrepreneurs can identify them and build a strategy to capitalize
them; the subjective objective approach focusing on the ability and individual
characteristics of entrepreneurs; and the subjective creative approach where the
opportunity is built in the mind of the entrepreneurs using creative thinking.
If we consider that technology is at the core and origin of the new venture we
will refer to technology based-entrepreneurship. We have identified many authors that
paid attention to the concept of innovative entrepreneurship related to new
technologies development. Gaglio, De Koning, Singh and Therin argue that
entrepreneurship and opportunities are a social construct and correlated with
entrepreneur values, behavior cognitive capabilities, knowledge, competence, skills
and connections with entrepreneurial ecosystem and individual motivations (Gaglio,
1997; De Koning, 1999; Singh, 1999).
Technology based entrepreneurship brings in more novelty, innovations and
R&D products on the markets. If technology is involved, entrepreneurship consists in
bringing important changes into the traditional markets and in society compared to the
more traditional entrepreneurship.
For entrepreneurs in the field of technology, opportunity recognition starts
with the sensing of a need or a change and ends with innovative solutions in which
future potential economic value is validated and recognized. The new venture will
generate value for stakeholders and owners if the founder will understand the
entrepreneurial ecosystem. Information’s and knowledge should have been gathered in
order to answer key issues regarding business model, new venture and markets.
Techno-entrepreneurs will have to undergo a series of other activities, non-technical
ones related to management, including creative thinking, incubating, demonstrating,
validating, promoting and sustaining (J olly, 1997). Entrepreneurs can extend their
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knowledge about technology, entrepreneurship, managerial skills and competences
through their professional, and all these are limited by their absorptive capacity and
ability to understand the entrepreneurial ecosystem. Techno-entrepreneurs will draft
and redraft their vision and strategy linking the opportunities with business
environment and startup capabilities. Proactive entrepreneurs will understand the
business environment opportunities, risks and will innovate their business models,
products or services to become competitive.
Collaboration in entrepreneurship is very important because synergies and
complementarity can make a new venture competitive in the field of very expensive
resources. Technology parks can bring together entrepreneurs or startups with
distinctive and complementary capabilities. The main role of technological parks is to
interconnect components like communities, universities, governmental agencies and
institutions, resources and to foster innovation through collaboration. The most
important objectives of technological parks are: to foster innovation and collaboration,
to be an interface between science and business environment, to generate value in
regional economy, and to provide technical and business consulting services.
Corporations have also an important role in technological ecosystems. In
addition to the innovative character of corporate entrepreneurship initiatives in large,
medium and small companies can generate spin-offs when employees decide to use
their skills and know-how into a new start-up venture..
3. INFORMATION TECHNOLOGY SECTOR MAIN LEVELS
Information technology industry has been in constant evolution over time and
the most important changes they underwent were determined by the entrepreneurial
innovations and by the social progress that has generated new needs in society. As
evolution, over time, we can distinguish several important stages of information
technology industry, which is its most important cycles: the time of the first
innovations in the field of information technology and first personal computers,
between 1970 and 1995; pre-Internet and Internet bubble between 1995 and 2000;
users’ needs centered technology between 2000 and 2010; cloud computing and
internet of things from 2010 to present.
In developed countries, the information technology sector is one of the largest
in the economy with a rate of over 10% of GDP. The contribution of technology to
economic growth is more important, because of the business sectors complementarity.
Information technology is the foundation of development, efficiency and productivity
of the developed economies. According to OECD statistics, over 20% of the growth is
due to the information technology sector and one third to research and development
that takes place in business sectors (OECD, 2014).
Information and communication technology provides fundamental and
ubiquitous infrastructure for a modern economies and societies, facilitating processing,
storage and transmission of information.
Identifying the main components that are part of a technology ecosystem is a
difficult task because the field of information technology is extremely dynamic. The
life cycle of high-tech products was shortened considerably. Competitiveness of
information technology companies is correlated with innovation and with products and
services portfolios. An important thing to consider is the behavior and strategies of
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technology companies. Because the field of information technology is relatively new,
some companies have developed new niches. The dynamics of information technology
sectors is determined by leading technology companies’ capacities and capabilities to
set the trends. Therefore, the dynamics of the whole sector can be correlated with the
strategies of the main players in the field of information technology.
Information technology ecosystems are composed by several levels, each with
different characteristics and there is also an interdependence and relationships between
this levels. Entire ecosystem dynamics is related to relationships between his
constituent elements.
Information technology ecosystems are both technological architectures or
engineering structures and economic and institutional models and structures.
Technology entrepreneurial ecosystem consists in specific architectural engineering,
equipment’s, technologies, information resources and economic components like
business sectors, markets, organizations and economic services whose operations is
based on information technology and institutional framework that regulates and defines
business environment. Technology ecosystems should be viewed in terms of the
functions it performs and its functionality. Technology industry where entrepreneurial
ideas become businesses is a modular system in terms of technical and technological
engineering sciences, which is defined by a variety of technological architectures, and
from the economic perspective a variety of organizational forms.
A technological ecosystem consists of for main groups of components as
follows:
- Level 1: interconnected equipment’s and elements, computers, mobile
devices, network equipment
- Level 2: communication and telecommunication networks
- Level 3: platforms, applications and content
- Level 4: users and clients of technology ecosystem
At all levels we have a variety of elements that are interdependent and
connected. Information technology industry is regulated by laws and rules and this
regulations are country specific. The development of technology entrepreneurial
ecosystems levels is correlated with the degree of regulations and governmental
strategies. Also, the degree of technology ecosystem levels development greatly
influence consumer behavior and trends. Competition and innovation are determinants
of the direction in which each level which forms the technology ecosystem will evolve
in the future. A technological ecosystem is defined by the nature of the relationships
and connections between components arising and its levels.
The first level of information technology ecosystems is a fundamental one and
brings together all equipment, components, computer systems, network equipment,
mobile phones, tablets and other devices that generate, access and process information.
The development of communication and telecommunications networks in the 1990s
was made possible through innovation, the adoption of global standards and integration
of a large number of network equipment. The principles that govern our economy in
this times are based on networks, relationships and interconnected resources. It is a
trend to integrate all equipment’s and resources in global networks. The next-
generation networks will be the Internet of things, cloud computing and big data
infrastructures. All this trends will transform the businesses and social life.
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Items of the first level, are interconnected at the second level. At this level we
find communication and telecommunication networks, which ensures the integration of
fixed and mobile components and equipment’s of the first level and information
transmission between them. Communication and telecommunication networks and
services are key components of ecosystems because provide the ubiquity of
information. The second level of technology ecosystem can be regulated by
governmental and institutional rules and laws. In the first stages of the emergence and
development, these networks were separated by standards and by different needs
addressing on the market. In the first period of their emergence, communication
networks have been unbundled by telephone networks, cable television and satellite
networks. In the last decade we have seen a tendency to unify the networks,
communication services. The services become substitutable or complementary and was
adopted a strategy of unification of the technological standards and protocols. The
convergence of technologies and standards generate a profound change in the
technological ecosystem. The impact of technology products and services in economy
and society is much higher and competitiveness of technology companies increase
steadily. As evolution in time, the second level has undergone significant changes. In
the first stage of their development, communication and telecommunication networks
were subject of continuous regulations which had the effect of increasing the dominant
position on the market for the large companies. The conceptual framework on which
were built telecoms regulations has not considered important the endogenous
innovation capacity of companies to remain competitive. In addition, specific markets
and network effects, mainly favors those companies that have a high number of users
and clients. The greater the number of users in a network, the lower will be the
operating costs. The network effect increase the network capacity expansion and thus
increase revenue. Therefore, at this level of technology ecosystem have developed with
a greater extent those companies who have been privileged by dominant position on
the market. Over time, the regulations that governed the telecommunications sector
have limited or encouraged competition. The central focus was both on companies and
on the end user following the principle of balance. According to this principle,
competition in the sector ensures maximum benefits for users.
On the second level of the technology ecosystem we can find a very important
component, especially if we consider that the main role of the ecosystem is to provide
access to information. In the technical literature we can found the concept of
"middleware" which means those applications and services which provide the
possibility to use and manipulate information, that assure the connections between
databases and knowledge, and operating system interfaces to provide users access,
storage capacity and information processing systems. Basically, what we meant by
"middleware" is a bridge between information owners and users through
communication networks and computing systems. Currently, online applications,
mobile devices and services provides much of the global access to information. The
platforms are those facilitating the handling of the data, information and knowledge.
It is important to note that the third level of technology ecosystems acts as a
veritable platform for innovation. At this level we can see entrepreneurial initiatives,
many of them innovative with high impact in economy and society. The initial
investment required to start a business at this level of ecosystems is not very high and
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investment funds have a high interest to support entrepreneurs who have innovative
ideas for products and services. Products and business models can be validated and
scaled easier on the third level and for an entrepreneur this is very important. Another
argument that we can bring to the attractiveness of this level, is that entrepreneurs are
in a direct relationship with customers by understanding the trends and needs of
society. We are currently witnessing a trend of increasingly high technology role in
human life. Technology is responsible by a big part of the business and human
activities. Augmented reality, extending human senses and information ubiquity, as
technology trends have led to an increased interest of entrepreneurs to start new
ventures, and the development of a large number of applications.
With the support of Internet service providers, middleware platforms came to
be used on a global scale. Major global technology companies have built their
platforms and standards for online content and services using the Internet infrastructure
and services from the second tier of technology ecosystem, as well as applications and
resources from the third tier. Currently, most companies working in information
technology have changed the strategy providing online services and applications for
mobile devices and sensing the accelerated trend of development of the third level.
Functionality and operability of all the for levels, connectivity, access to global
Internet network, services, products for information browsing and searching and
middleware platforms that represents innovation platforms, offer full context and
instruments for the end user. Users can use applications and services to access,
manipulate and generate data, information and knowledge, and all for levels of
technology ecosystem will cooperate in this respect. The concepts like content,
applications and services is the essence of social and economic activities and outputs
that are generated through the use of technology. The concept of content refers to
information provided by networks, by global Internet network or stored on various
media. An application means a program or group of programs designed and used by
users, which include a number of features.
The fourth level of the information technology ecosystem, includes all users
who often identify with the end users and customers of the other three levels.
Customers have a major role in the industry and most of companies have redefined the
business strategies focusing greater on customer relationships and their experiences.
This strategic shift has been driven by the dynamics of business sectors and by the
increasing role of innovation to gain competitive advantage.
There are two facets of the causes that led to changes in specific technology
ecosystems, namely the processes that generate variety and the selection alternatives
within variety. Schumpeter considered the changes taking place in capitalism are
generated by the four forms of innovation: new or improved products and services,
new processes or production methods, new forms of organization and development of
new markets.
Developments of technology ecosystems must be analyzed in dynamic over
time because the changes of their structures and functions is related to society needs
and to technical and technological progress. Technological ecosystem dynamics is
determined to a large extent by symbiotic relationships that arise on the every levels
and between them. Entrepreneurship reflected by the emergence of new products and
services, new business models and processes, new forms of organization and new
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markets is determined by the dynamics of ecosystem relationships and connections.
Symbiotic relationships arising in technological entrepreneurship ecosystem can have
multiple dimensions or features. They can be financial, material or information flows
and synergies across the ecosystem.
The effects of symbiotic relationships arising between the four pillars that
make up a technology ecosystem are embodied in what is today the impacts of
information and technology in society and on businesses. Globalization trends would
not have been possible without the support provided by information technology and
communications networks. Changes in social and business activities, generated by
increasing role of information are made possible by the smart devices, by the capacity
of increasingly large communications networks and by new innovative platforms that
are promoting Internet of Things principles. Technology has profoundly change the
way in which entrepreneurs and organizations carry out their activities. Business
processes, tasks and activities now underway through applications available online on
the Internet, and via mobile devices. Mobile information access services provided by
communications and telecommunications networks had profound influences on the
business environment. Online services and mobile applications have stimulated the
organizations. Organizational flexibility, mobility and agility have become conditions
that can be provided through access to information in a ubiquitous manner.
The relationships between the third and fourth levels of technology
ecosystems, namely between technology platforms, content and applications and end
users will generate the context in which entrepreneurs will develop the new ventures. It
is important also for entrepreneurs and for sectorial strategy makers to understand the
relationships between components of the ecosystems levels.
4. ENTREPRENEURIAL PROCESS AND STRATEGY CONTINGENCY FACTORS
In entrepreneurship, business strategy development is closely related to the
entrepreneurial process. Entrepreneurial process is often associated in the literature
with business life cycle and includes functions, activities and actions associated with
the recognition of business opportunities, generating, evaluating and validating new
business ideas and innovations. All this are included in a business model,
entrepreneurial strategy and a business plan. In the entrepreneurial process, the
entrepreneur must take into account the influences of the business environment and
contingency factors that can influence entrepreneurial strategy.
Entrepreneurial process, as we can see in the figure 1, from our perspective
include four main steps: the first step is the opportunity recognition and generating
business ideas and innovations; the second step is the feasibility and validation of the
business idea and business model; incorporation of the idea into a new venture; growth
stages. The four stages of entrepreneurial process are defined by objectives and
activities established and undertaken by entrepreneur and his team.
The first step, we name it prefeasibility is to identify the feasibility of business
opportunities, generating business ideas or to achieve innovations. Recognizing
opportunities is a complex process that involves a passive or active scanning of
business environment and markets. Scanning the business environment offers many
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alternatives in terms of the types of opportunities. Opportunity is a business idea and
it’s potential to be realized.
Figure no. 1 The four stages of entrepreneurial process
The second stage of the entrepreneurial process is when business is defined
through a business model and a business plan. At this stage of development a strategy
is very important. Business idea is embodied in a business model whose main role is to
identify the way in which the new venture will generate value for stakeholders. The
business model is reflected in a business plan that describe in more details the most
important aspects of the business. The second step is validating and analyzing the
feasibility of the business idea or the business model. At this stage the business idea,
prototypes and products can be tested with specific tools. It is important also for
entrepreneurs to validate the capacity of business model to generate value for
stakeholders.
The third step is to launch the new venture. The growth stages require
investments and financial capital and entrepreneurs have to identify and attract the
most suitable resources for the business. At this stage, the characteristics of the
business environment and influences of the contingency factors are extremely
important and may affect to a large extent the entrepreneurial process. Implementation
of the business plan into a new venture involves identifying and acquisition of needed
resources, defining organizational structures and assessment of any legal aspects of the
organizational activities. At this stage, the new founded organization becomes visible
within the business sector. The strategy developed in the second stage begins to be
carried out, start-up defines its organizational boundaries, and the next step is to start to
combine available resources in order to achieve strategic objectives. Entrepreneurs
have to build organizational structure, the team and human resources skills and
competences must be defined and developed. Entrepreneurs leadership styles and soft
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skills are very important at this stage because team are formed and are established the
values and other organizational factors of new venture future success.
Business idea incorporation and business plan implementation is an
independent step in the entrepreneurial process which do not often generate growth or
immediate results. In most cases, following the steps of the entrepreneurial process
involves increasing the complexity of business activities the entrepreneur will face.
Increasing complexity is determined by contingency factors that entrepreneur must
take into account in the process of business development. Entrepreneurs have to choose
between complexity of business growth and stability afforded by a smaller size of the
organization. The reasons for this decision stems from the entrepreneurs desire to
maintain control over the organization and informal relationships with team members.
A smaller organization such as start-ups is easier to be managed because the
organizational structure is flattened and organizational flexibility is higher.
Entrepreneurs have to manage the balance between stability generated by the small size
of the organization and complexity generated by business grow and development. A
lack of growth and development can have adverse consequences on a start-up, while
keeping a balance between business development and organizational agility and
flexibility is extremely important. Creating this balance depends largely on
entrepreneur’s skills, competencies and capabilities.
Transition from the stage of new venture formation to business growth stages
requires a more comprehensive approach to business and a different view of
contingency factors. In the first stage of growth the entrepreneurial strategy should
focus on strengthening the organizational structures and identification of the most
appropriate funding sources. Entrepreneurial strategy must define which capacities,
capabilities and resources organization should develop to be competitive on the market.
Managerial skills of the entrepreneur becomes useful during the stages of business
growth and a controlling system can be useful for initial and further planning.
The success of business growth stages depends on entrepreneur’s strategic
vision, entrepreneurial strategies implementation and the way in which entrepreneurs
translate the strategic objectives in operational ones. In the growth stages startups will
capitalize their potential and the company will be more competitive in the business
sector. In this stages entrepreneurs will become managers and complexity of business
activities and processes will increase. When a business grow a manager have to
manage complex situations. Organizations also evolve in the growth stage and
organizational structures and processes become more complex. The core competencies
of organizations have to be developed during the launch and growth stages and will
provide the strengths for the business to be competitive on the market. Accelerated
growth, specific for information technology startups is based on innovation and
supported by financial resources that allows them to go through the growth stages.
Another important factor on which the entrepreneur must reflect is
organizational culture. The values promoted by organization, working values, routines,
culture of collaboration and performance can bring a contribution to sustained business
growth. In information technology organizations, human resource competences are the
core values and a very important component of business model which can generate
sustainable competitive advantage. Skills and employee competences can hardly be
imitated by competitors. Attracting and retaining the most competent employee’s, the
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progress through continuous learning, creativity fostering and collaboration are factors
that can provide organizational development and competitiveness. Employee’s
distinctive competences can be capitalize through collaboration to increase cohesion
and complementarity of skills, which will lead to synergies. Synergistic effects,
organizational flexibility and ensuring resources are the most important preconditions
to ensure future growth stages. Growth of a start-up is never accidental and is a
consequence of the strategic approach and entrepreneurial skills of the entrepreneur.
Start-up growth stages, classic or accelerated, are correlated with internal
organizational environment and with contingency factors in the external environment.
Startup strategic alignment of capabilities, capacities and resources with threats and
opportunities of business environment is extremely important. Understanding the
business sector and the main structural trends will contribute to the organization's
strategic alignment with business sectors, markets and to minimization of internal and
external contingency factors influences.
To make a competitive start-up and to grow their businesses entrepreneurs
have to understand the contingency factors and their influences. There are internal
contingency factors which can be managed by entrepreneurs and the external one.
There are various correlation between contingency factors inside and outside the
organization. For example, the discovery and exploitation of business opportunities are
possible if entrepreneur has the knowledge and entrepreneurial flair. Opportunities
could not be exploited if the organization would not have capabilities and capacities
through which resources are processed. Only discovering opportunities by an
entrepreneur will not be a guarantee of success for start-up. Exploiting opportunities
largely depend on entrepreneurial strategy and how entrepreneur will exploit
organizational capabilities and the mix of resources. Contingency factors from business
environment are the most difficult to counteract and to be managed. In the business
environment we can find social, economic, technical and technological factors,
governmental, environmental, political and legal contingency factors.
The success of entrepreneurial approach is largely attributed to the skills and
characteristics of the business founders, strategic vision and the way in which
entrepreneurs make decisions. Entrepreneur’s intentions and determination to grow
their business are important and reasons to starts a new venture fall into two categories:
opportunity entrepreneurs or necessity entrepreneurs. The first category are motivated
to develop a new business because they identified a business opportunity that can be
exploited. In the second category we can place entrepreneurs who develop their
business as a necessity or from emergency situation not from opportunities.
4. ENTREPRENEURIAL STRATEGY CONTINGENCY FACTORS
As regards the external environment, entrepreneurial process, as figure number
two reflected, is influenced by social, technological, economic, legal, political or
governmental and environmental factors. The level of specialization of human
resources is a very important contingency factor for startups in the field of information
technology. The level and number of information technology qualification and
certifications, and complementary skills are particularly important factors for
increasing the competitiveness of a startup. In the first stage of entrepreneurial process
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entrepreneurial education and acquired skills and competences are very important, also
individual characteristics such as acceptance of ambiguity, critical and creative
thinking, open minded and innovation culture promoter. In the stages of business idea
incorporation and growth the availability of competences and their complementarity
are needed to define the core of the start-up. Culture of collaboration as social value
has a significant impact in generating synergies across the organization. In the
entrepreneurial process, the social characteristics of entrepreneurs also have an
important role.
Figure no. 2 Entrepreneurial strategy contingency factors
Values, thinking, behavior, communication skills, socialization, adaptation and
interaction with other professionals in the business environment have an influence on
how entrepreneurs acts. The space where entrepreneurs manifest themselves is defined
by communities’ therefore social skills and competencies are particularly important.
Social relationships and networking are particularly useful resources and skills that can
be used in any stages of the entrepreneurial process.
For information technology entrepreneurs, analyzing the impact that it has the
technology in business development is important throughout entire business life cycle.
To understand the business opportunities, an entrepreneur who invests in information
technology should know and understand the principles that govern the industry. The
pace of information technology industry development is higher. The life cycle of
technologies shortened over time due to competition and increasing role of innovation
in business development. Competition and the clients’ needs diversification on the
market, have increased the pace at which organizations should innovate and bringing
new innovations on the market shortening the product life cycle. In the previous
paragraphs we argue that technology entrepreneurship in recent years are more
common on the third tier of the technology ecosystem. This level is application-
specific and innovative platforms being closer to the real needs of society and the
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initial investment is not so high. Starting a business on the third tier of a technological
ecosystem require access to technology, licenses, skills and know-how. Ensuring future
growth stages involves identifying all these resources in the business environment in
which the entrepreneur operates. The diffusion of new technologies in society is one of
the factors that significantly influence the success of a start-up phase since launch. The
peace of innovation must be correlated with the degree of absorption of innovative
products in economy and society. Countries with developed technological ecosystems
have a much greater capacity to absorb technological innovations. Know-how that the
founders of start-up can acquire it exceeds the social space and the acquisition of
technical skills is related to the technological ecosystem potential to generate all this
knowledge.
The influences of cultural factors are manifested as an attitude that society has
on entrepreneurship. The image of entrepreneurs in society and society's attitude
towards entrepreneurial failure have a significant impact on the number of new
businesses. Successful businesses are considered to generate value in society and in
economy. A positive attitude about entrepreneurship will generate a positive impact for
new startups. A mature business culture offers opportunities for entrepreneurs who
failed in their first new venture because failure is considered as part of the learning
process. In positive entrepreneurial cultures the failure it is not attributed to personal
characteristics of the entrepreneur, but contingence factors and how the entrepreneur
was able to make decisions interpreting information from the business environment. In
developed countries, technology entrepreneurial ecosystems have an important role in
value creation in the economy and society, therefore entrepreneurial culture can and
should generate a positive climate for new ventures.
As a correlation with other economic influence factors, creating an
entrepreneurial culture that encourages funding is crucial at all stages of the
entrepreneurial process. For new ventures the micro-loans, seed funding and business
accelerators programs can generate a context in which potential future entrepreneurs
have a greater determination to put their business ideas into practice.
Lack of information and knowledge about technology industry is one of the main
reasons why start-ups fail. It is necessary for entrepreneurs that before initiating a new
company to know in detail the industry and the market, clients and competitors. In this
process of researching entrepreneur should seek current and relevant information about
the industry, market and competitors and analyze them in depth. There are also very
useful information about selling and the dynamics of competitors in the last five years,
details about innovation and competitors’ business models. Entrepreneurs have their
own vision of key factors which influence the relevant industry segment as well as the
future trends of the business sector. The forecasting about the sector's ability to grow in
the next five years is also very useful in all the entrepreneurial process stages. To be
able to develop strategies, entrepreneurs needs accurate and complete information
about uniqueness of the main competitors in the business sectors and their capabilities
which ensures competitive advantages, potential weaknesses that can be exploited, and
other sources of competitive advantage. Any business sector have entry and exit
barriers. The entry barriers are specific on the every level of information technology
industry. More specifically, an entrepreneur who plans to launch a new business in the
first and second level will have to face high legal, financial and market entry barriers.
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Third level provides more opportunities and low entry barriers can be overcome easily.
On the third level of specific platforms, applications and online services is more easily
to launch a new venture because the initial investments are lower than on the first and
second levels. Business ideas, products and service can reach the customers more
easily through new online distribution channels.
In the entrepreneurial process, an entrepreneur must predict and understand the
trends and complementarity of specific information technology markets. There are
useful information about attractiveness, market size and segmentation, about the
growth potential of the target group, stages and characteristics of the industry, demand
typology, operating conditions on the market, the criteria that determine the
attractiveness of the market and the factors that have an influence on innovation and
technological development.
To be able to develop innovative business models that generate added value
and which is difficult to be replicated by competitors, entrepreneur must understand
and know in detail the competitors in the sector: direct and indirect competitors,
potential new competitors may influence relations arising within it. Proactive
entrepreneurs should understand the competitors: information about business models
that define strategies, the future directions of competitors’ development, customer
groups targeted by competitors, competitors the market share, cost structure and
competitors productivity and what are the most relevant sources of competitive
advantage in the business sector.
This work was co-financed from the European Social Fund through Sectoral
Operational Programme Human Resources Development 2007-2013, project number
POSDRU/159/1.5/S/134197 „Performance and excellence in doctoral and
postdoctoral research in Romanian economics science domain”.
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doc_680945863.pdf
Detailed outline in regard to technology entrepreneurial ecosystem structure and entrepreneurial strategies contingency.
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TECHNOLOGY ENTREPRENEURIAL ECOSYSTEM STRUCTURE AND
ENTREPRENEURIAL STRATEGIES CONTINGENCY FACTORS
Lect. dr. Alexandru Roja PhD
West University of Timisoara
Faculty of Economics and Business Administration
Timisoara, Romania
Abstract: One of the most important factors of social and economic
progress now is the information technology. To develop their new
ventures, entrepreneurs need a business environment, we name it
entrepreneurial ecosystem, to generate, validate and implement viable
business ideas, and resources and services to grow the business. The
new venture competitiveness in the field of information technology
depends on the entrepreneurial ecosystem structure and their
components. The relationships arising between the elements of the
technological entrepreneurial ecosystems generate opportunities and
advantages for entrepreneurs and businesses. In our research we
analyze the structure of technology entrepreneurial ecosystems and the
most important contingency factors that influence entrepreneurial
strategies.
JEL classification: L10, L26, M13
Key words: entrepreneurship; strategic management; technology ecosystem;
entrepreneurial strategies; competitivity
1. INTRODUCTION
Information technology is extremely important for social and economic
development and it is the most dynamic area for entrepreneurial ideas. The importance
of entrepreneurship in the field of information technology is related to the impact of
technologies in economy and society. On the other side, entrepreneurs are attracted by
the information technology field because the time for business ideas and products
validation is short and they can go quickly on the market. In the field of information
technology, human resources skills and competences are the most valuable assets, but
the factor that make the difference is innovation. Field of information technology is
characterized by a very high dynamic, business start-ups emergence, and the
opportunity for entrepreneurs to be competitive through a strategic approach.
Research objectives of this research paper was to analyze entrepreneurial
ecosystems structures, the levels and other elements that compose technology
entrepreneurial ecosystem and the most important contingency factors for
entrepreneurial strategy.
The research is based on two main directions as assumptions. The first line of
research is based on the description of technology entrepreneurial ecosystems and its
structure. We were interested to find and analyze the most important components of the
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ecosystem and the levels of information technology industry. The second direction of
research was focused on entrepreneurial strategy contingency factors. For many
entrepreneurs the only compass in their entrepreneurial orientation is still intuition and
not strategy. When they engage in new ventures in the regional ecosystem, they found
few reference points by which to start and grow a startup, a lack of support services to
understand the steps and the skills they need in entrepreneurship and business
management. For that it is important to understand all the contingency factors that can
shape or affect a strategy.
2. TECHNOLOGY ENTREPRENEURIAL ECOSYSTEMS
According to Schumpeter, the most important function of entrepreneurs is to
reform or to reinvent the way in which value is generated by exploiting inventions and
innovation. Business environment is characterized by globalization, increasing use of
knowledge and increasing role of innovation in regional innovation systems and the
importance of technological entrepreneurship as a factor in the wealth creation
generate the emergence of new types of entrepreneurial ecosystems (Camagni, 1995;
Feldman, 1994; Porter, 1990). The reason why some regions are more advanced than
others lies in successful use of new technologies and entrepreneurship fostering in
information technology.
Related to Therin there are several words and definitions used in scientific
articles for entrepreneurship in the field of technology as technology entrepreneurship,
technical entrepreneurship, techno-entrepreneurship and technology entrepreneurial
ecosystems (Therin, 2007).
The most cited authors Dorf and Byers, define technological entrepreneurship
as a style of business leadership that involves identification and human resource high-
potential capitalization, technology-intensive commercial opportunities, managing
accelerated growth and significant risk taking (Dorf and Byers, 2005). In their
definition Shane and Venkataraman see technological entrepreneurship as the
processes of assembling resources, technical systems and strategies by an
entrepreneurial venture to pursue opportunities (Shane and Venkataraman, 2004).
We can analyze technology entrepreneurial ecosystems or technological
entrepreneurship at many levels and from interdisciplinary perspective. We have
identified more than nine key elements of technology entrepreneurial ecosystem: new
technology ventures, communities, universities, corporations, capital and investments,
markets, business sectors, government, professionals, advisors and other components
like incubators, accelerators and hubs.
The most important component of technology entrepreneurial ecosystem is the
entrepreneur itself, and he is the key catalyst in the process of business sectors
emergence and start-ups growth. Technology entrepreneurs have more technical skills
and competences than non-technical ones, and they have to acquire also business and
managerial skills. One important step in the new venture success is the transformation
of the entrepreneurial mind into managerial one. The business will become more
complex and entrepreneurs have to understand the business environment, they need a
vision and a strategy to make competitive the new venture. Technology entrepreneurs
have to understand how the new venture will evolve and the importance of managerial
skills, and most important strategic oriented mindset. The most important three
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motivational factors of the technological entrepreneurs are independence, opportunities
exploitation and value generation (Oakley, 2003). In information technology industry,
the networks between entrepreneurs are enhancers of business life cycle stages.
Continuous learning is important for entrepreneurs and also for managers
because they need to develop their skills and competences and educational institutions
as components of the entrepreneurial ecosystems provide this educational services. The
most important role of universities is the educational one as a supplier of qualified
workforce. Universities can act as a node in the network between corporations,
incubators, research centers, clusters and technology parks. Universities have also an
important role of spin-off generators, when research products or knowledge generate
values in business environment.
Collaboration between universities, research centers, start-ups incubators,
corporations, small and medium enterprises and other regional entities is very
important to foster innovation, know-how transfer and human resource development.
At the regional level, clusters as a form of collaboration between companies can
increase competitiveness of start-ups, and have positive effects on innovation and long
term development. The main role of technological parks, incubators, accelerators and
hubs is to ensure and enhance collaborative and interconnected environment which
increase interaction between communities, resources, ideas and technologies.
Entrepreneurial approaches in information technology industry have become
important sources of value generation and growth in Europe due to the dynamics and
the value that information technology brings in our daily life and in business.
Developed countries have realized the major role that information technology have in
society and in economy. Technology can be harnessed by strategies that encourage,
ensure and accelerate the creation of start-ups in information technology field.
Currently techno-entrepreneurship promises both high profits and high risks for
founders and investors.
For entrepreneurs one of the biggest challenges is to validate the value of
opportunities and business idea before its realization. The main goals of the
entrepreneurial approach is to create and capturing economic value either by
developing new technologies or by exploiting them. To achieve these goals,
entrepreneurs must develop strategies and business models to recreate new dimensions
of socio-economic life beginning from ideas and strategic vision.
The ability to recognize business opportunities is a major skill an entrepreneur
should acquire and it will dramatically shape the future of his venture. To our view,
despite a thorough understanding of the opportunity recognition process, its
determinants of success and failure, quite an important lack of understanding remains
as to appropriate anticipative and proactive approaches. The literature in the fields of
management and entrepreneurship assumes that entrepreneurs are able to anticipate, to
be proactive and to build a credible vision of their business. Proactive thinking is an
important ability of entrepreneurs. They need to understand the business environment
and the influences of entrepreneurial ecosystem components to new venture strategies.
Proactive management enables entrepreneurs to understand and to exploit the first
signs of changes and to develop strategies to minimize risks and maximize competitive
advantage of their businesses.
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Counteracting and minimizing specific risks and negative influences of
business environment dynamics require proactive entrepreneurial strategies and plans
deployments to make startups competitive, or to increase the competitiveness of
existing ones. The relation between entrepreneurs and entrepreneurial ecosystem
components is particularly important in the light of opportunities identification,
information and knowledge acquired and conceptualization of future business value.
Schumpeter (1976) put the emphasis on entrepreneurs as those who, in opposition to
traditional capitalists, engage in new activities or ventures that did not exist before and
in innovative or creative ones. Schumpeter views on entrepreneurship is that
entrepreneurs have to explore new opportunities in order to build a new world order
while deconstructing or destructing the old one. Entrepreneurship can be defined as an
activity and a process involving the discovery, creation and exploitation of
opportunities in order to create value thanks to the introduction of new goods, services,
processes and organizations (Therin, 2007).
The way individuals recognize opportunities for business creation is one of the
first critical abilities in the early stages of the business development process.
Entrepreneurs have to be those people who sense, create and respond to changes and
needs regarding a possible opportunity for profit. The literature review highlights
different approaches of entrepreneurship. Davidson (2004) argue that in practice we
can identify in entrepreneurial ecosystem three main streams of thinking about the
nature of an opportunity: the objective approach in which opportunities do exist in the
environment so that entrepreneurs can identify them and build a strategy to capitalize
them; the subjective objective approach focusing on the ability and individual
characteristics of entrepreneurs; and the subjective creative approach where the
opportunity is built in the mind of the entrepreneurs using creative thinking.
If we consider that technology is at the core and origin of the new venture we
will refer to technology based-entrepreneurship. We have identified many authors that
paid attention to the concept of innovative entrepreneurship related to new
technologies development. Gaglio, De Koning, Singh and Therin argue that
entrepreneurship and opportunities are a social construct and correlated with
entrepreneur values, behavior cognitive capabilities, knowledge, competence, skills
and connections with entrepreneurial ecosystem and individual motivations (Gaglio,
1997; De Koning, 1999; Singh, 1999).
Technology based entrepreneurship brings in more novelty, innovations and
R&D products on the markets. If technology is involved, entrepreneurship consists in
bringing important changes into the traditional markets and in society compared to the
more traditional entrepreneurship.
For entrepreneurs in the field of technology, opportunity recognition starts
with the sensing of a need or a change and ends with innovative solutions in which
future potential economic value is validated and recognized. The new venture will
generate value for stakeholders and owners if the founder will understand the
entrepreneurial ecosystem. Information’s and knowledge should have been gathered in
order to answer key issues regarding business model, new venture and markets.
Techno-entrepreneurs will have to undergo a series of other activities, non-technical
ones related to management, including creative thinking, incubating, demonstrating,
validating, promoting and sustaining (J olly, 1997). Entrepreneurs can extend their
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knowledge about technology, entrepreneurship, managerial skills and competences
through their professional, and all these are limited by their absorptive capacity and
ability to understand the entrepreneurial ecosystem. Techno-entrepreneurs will draft
and redraft their vision and strategy linking the opportunities with business
environment and startup capabilities. Proactive entrepreneurs will understand the
business environment opportunities, risks and will innovate their business models,
products or services to become competitive.
Collaboration in entrepreneurship is very important because synergies and
complementarity can make a new venture competitive in the field of very expensive
resources. Technology parks can bring together entrepreneurs or startups with
distinctive and complementary capabilities. The main role of technological parks is to
interconnect components like communities, universities, governmental agencies and
institutions, resources and to foster innovation through collaboration. The most
important objectives of technological parks are: to foster innovation and collaboration,
to be an interface between science and business environment, to generate value in
regional economy, and to provide technical and business consulting services.
Corporations have also an important role in technological ecosystems. In
addition to the innovative character of corporate entrepreneurship initiatives in large,
medium and small companies can generate spin-offs when employees decide to use
their skills and know-how into a new start-up venture..
3. INFORMATION TECHNOLOGY SECTOR MAIN LEVELS
Information technology industry has been in constant evolution over time and
the most important changes they underwent were determined by the entrepreneurial
innovations and by the social progress that has generated new needs in society. As
evolution, over time, we can distinguish several important stages of information
technology industry, which is its most important cycles: the time of the first
innovations in the field of information technology and first personal computers,
between 1970 and 1995; pre-Internet and Internet bubble between 1995 and 2000;
users’ needs centered technology between 2000 and 2010; cloud computing and
internet of things from 2010 to present.
In developed countries, the information technology sector is one of the largest
in the economy with a rate of over 10% of GDP. The contribution of technology to
economic growth is more important, because of the business sectors complementarity.
Information technology is the foundation of development, efficiency and productivity
of the developed economies. According to OECD statistics, over 20% of the growth is
due to the information technology sector and one third to research and development
that takes place in business sectors (OECD, 2014).
Information and communication technology provides fundamental and
ubiquitous infrastructure for a modern economies and societies, facilitating processing,
storage and transmission of information.
Identifying the main components that are part of a technology ecosystem is a
difficult task because the field of information technology is extremely dynamic. The
life cycle of high-tech products was shortened considerably. Competitiveness of
information technology companies is correlated with innovation and with products and
services portfolios. An important thing to consider is the behavior and strategies of
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technology companies. Because the field of information technology is relatively new,
some companies have developed new niches. The dynamics of information technology
sectors is determined by leading technology companies’ capacities and capabilities to
set the trends. Therefore, the dynamics of the whole sector can be correlated with the
strategies of the main players in the field of information technology.
Information technology ecosystems are composed by several levels, each with
different characteristics and there is also an interdependence and relationships between
this levels. Entire ecosystem dynamics is related to relationships between his
constituent elements.
Information technology ecosystems are both technological architectures or
engineering structures and economic and institutional models and structures.
Technology entrepreneurial ecosystem consists in specific architectural engineering,
equipment’s, technologies, information resources and economic components like
business sectors, markets, organizations and economic services whose operations is
based on information technology and institutional framework that regulates and defines
business environment. Technology ecosystems should be viewed in terms of the
functions it performs and its functionality. Technology industry where entrepreneurial
ideas become businesses is a modular system in terms of technical and technological
engineering sciences, which is defined by a variety of technological architectures, and
from the economic perspective a variety of organizational forms.
A technological ecosystem consists of for main groups of components as
follows:
- Level 1: interconnected equipment’s and elements, computers, mobile
devices, network equipment
- Level 2: communication and telecommunication networks
- Level 3: platforms, applications and content
- Level 4: users and clients of technology ecosystem
At all levels we have a variety of elements that are interdependent and
connected. Information technology industry is regulated by laws and rules and this
regulations are country specific. The development of technology entrepreneurial
ecosystems levels is correlated with the degree of regulations and governmental
strategies. Also, the degree of technology ecosystem levels development greatly
influence consumer behavior and trends. Competition and innovation are determinants
of the direction in which each level which forms the technology ecosystem will evolve
in the future. A technological ecosystem is defined by the nature of the relationships
and connections between components arising and its levels.
The first level of information technology ecosystems is a fundamental one and
brings together all equipment, components, computer systems, network equipment,
mobile phones, tablets and other devices that generate, access and process information.
The development of communication and telecommunications networks in the 1990s
was made possible through innovation, the adoption of global standards and integration
of a large number of network equipment. The principles that govern our economy in
this times are based on networks, relationships and interconnected resources. It is a
trend to integrate all equipment’s and resources in global networks. The next-
generation networks will be the Internet of things, cloud computing and big data
infrastructures. All this trends will transform the businesses and social life.
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Items of the first level, are interconnected at the second level. At this level we
find communication and telecommunication networks, which ensures the integration of
fixed and mobile components and equipment’s of the first level and information
transmission between them. Communication and telecommunication networks and
services are key components of ecosystems because provide the ubiquity of
information. The second level of technology ecosystem can be regulated by
governmental and institutional rules and laws. In the first stages of the emergence and
development, these networks were separated by standards and by different needs
addressing on the market. In the first period of their emergence, communication
networks have been unbundled by telephone networks, cable television and satellite
networks. In the last decade we have seen a tendency to unify the networks,
communication services. The services become substitutable or complementary and was
adopted a strategy of unification of the technological standards and protocols. The
convergence of technologies and standards generate a profound change in the
technological ecosystem. The impact of technology products and services in economy
and society is much higher and competitiveness of technology companies increase
steadily. As evolution in time, the second level has undergone significant changes. In
the first stage of their development, communication and telecommunication networks
were subject of continuous regulations which had the effect of increasing the dominant
position on the market for the large companies. The conceptual framework on which
were built telecoms regulations has not considered important the endogenous
innovation capacity of companies to remain competitive. In addition, specific markets
and network effects, mainly favors those companies that have a high number of users
and clients. The greater the number of users in a network, the lower will be the
operating costs. The network effect increase the network capacity expansion and thus
increase revenue. Therefore, at this level of technology ecosystem have developed with
a greater extent those companies who have been privileged by dominant position on
the market. Over time, the regulations that governed the telecommunications sector
have limited or encouraged competition. The central focus was both on companies and
on the end user following the principle of balance. According to this principle,
competition in the sector ensures maximum benefits for users.
On the second level of the technology ecosystem we can find a very important
component, especially if we consider that the main role of the ecosystem is to provide
access to information. In the technical literature we can found the concept of
"middleware" which means those applications and services which provide the
possibility to use and manipulate information, that assure the connections between
databases and knowledge, and operating system interfaces to provide users access,
storage capacity and information processing systems. Basically, what we meant by
"middleware" is a bridge between information owners and users through
communication networks and computing systems. Currently, online applications,
mobile devices and services provides much of the global access to information. The
platforms are those facilitating the handling of the data, information and knowledge.
It is important to note that the third level of technology ecosystems acts as a
veritable platform for innovation. At this level we can see entrepreneurial initiatives,
many of them innovative with high impact in economy and society. The initial
investment required to start a business at this level of ecosystems is not very high and
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investment funds have a high interest to support entrepreneurs who have innovative
ideas for products and services. Products and business models can be validated and
scaled easier on the third level and for an entrepreneur this is very important. Another
argument that we can bring to the attractiveness of this level, is that entrepreneurs are
in a direct relationship with customers by understanding the trends and needs of
society. We are currently witnessing a trend of increasingly high technology role in
human life. Technology is responsible by a big part of the business and human
activities. Augmented reality, extending human senses and information ubiquity, as
technology trends have led to an increased interest of entrepreneurs to start new
ventures, and the development of a large number of applications.
With the support of Internet service providers, middleware platforms came to
be used on a global scale. Major global technology companies have built their
platforms and standards for online content and services using the Internet infrastructure
and services from the second tier of technology ecosystem, as well as applications and
resources from the third tier. Currently, most companies working in information
technology have changed the strategy providing online services and applications for
mobile devices and sensing the accelerated trend of development of the third level.
Functionality and operability of all the for levels, connectivity, access to global
Internet network, services, products for information browsing and searching and
middleware platforms that represents innovation platforms, offer full context and
instruments for the end user. Users can use applications and services to access,
manipulate and generate data, information and knowledge, and all for levels of
technology ecosystem will cooperate in this respect. The concepts like content,
applications and services is the essence of social and economic activities and outputs
that are generated through the use of technology. The concept of content refers to
information provided by networks, by global Internet network or stored on various
media. An application means a program or group of programs designed and used by
users, which include a number of features.
The fourth level of the information technology ecosystem, includes all users
who often identify with the end users and customers of the other three levels.
Customers have a major role in the industry and most of companies have redefined the
business strategies focusing greater on customer relationships and their experiences.
This strategic shift has been driven by the dynamics of business sectors and by the
increasing role of innovation to gain competitive advantage.
There are two facets of the causes that led to changes in specific technology
ecosystems, namely the processes that generate variety and the selection alternatives
within variety. Schumpeter considered the changes taking place in capitalism are
generated by the four forms of innovation: new or improved products and services,
new processes or production methods, new forms of organization and development of
new markets.
Developments of technology ecosystems must be analyzed in dynamic over
time because the changes of their structures and functions is related to society needs
and to technical and technological progress. Technological ecosystem dynamics is
determined to a large extent by symbiotic relationships that arise on the every levels
and between them. Entrepreneurship reflected by the emergence of new products and
services, new business models and processes, new forms of organization and new
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markets is determined by the dynamics of ecosystem relationships and connections.
Symbiotic relationships arising in technological entrepreneurship ecosystem can have
multiple dimensions or features. They can be financial, material or information flows
and synergies across the ecosystem.
The effects of symbiotic relationships arising between the four pillars that
make up a technology ecosystem are embodied in what is today the impacts of
information and technology in society and on businesses. Globalization trends would
not have been possible without the support provided by information technology and
communications networks. Changes in social and business activities, generated by
increasing role of information are made possible by the smart devices, by the capacity
of increasingly large communications networks and by new innovative platforms that
are promoting Internet of Things principles. Technology has profoundly change the
way in which entrepreneurs and organizations carry out their activities. Business
processes, tasks and activities now underway through applications available online on
the Internet, and via mobile devices. Mobile information access services provided by
communications and telecommunications networks had profound influences on the
business environment. Online services and mobile applications have stimulated the
organizations. Organizational flexibility, mobility and agility have become conditions
that can be provided through access to information in a ubiquitous manner.
The relationships between the third and fourth levels of technology
ecosystems, namely between technology platforms, content and applications and end
users will generate the context in which entrepreneurs will develop the new ventures. It
is important also for entrepreneurs and for sectorial strategy makers to understand the
relationships between components of the ecosystems levels.
4. ENTREPRENEURIAL PROCESS AND STRATEGY CONTINGENCY FACTORS
In entrepreneurship, business strategy development is closely related to the
entrepreneurial process. Entrepreneurial process is often associated in the literature
with business life cycle and includes functions, activities and actions associated with
the recognition of business opportunities, generating, evaluating and validating new
business ideas and innovations. All this are included in a business model,
entrepreneurial strategy and a business plan. In the entrepreneurial process, the
entrepreneur must take into account the influences of the business environment and
contingency factors that can influence entrepreneurial strategy.
Entrepreneurial process, as we can see in the figure 1, from our perspective
include four main steps: the first step is the opportunity recognition and generating
business ideas and innovations; the second step is the feasibility and validation of the
business idea and business model; incorporation of the idea into a new venture; growth
stages. The four stages of entrepreneurial process are defined by objectives and
activities established and undertaken by entrepreneur and his team.
The first step, we name it prefeasibility is to identify the feasibility of business
opportunities, generating business ideas or to achieve innovations. Recognizing
opportunities is a complex process that involves a passive or active scanning of
business environment and markets. Scanning the business environment offers many
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alternatives in terms of the types of opportunities. Opportunity is a business idea and
it’s potential to be realized.
Figure no. 1 The four stages of entrepreneurial process
The second stage of the entrepreneurial process is when business is defined
through a business model and a business plan. At this stage of development a strategy
is very important. Business idea is embodied in a business model whose main role is to
identify the way in which the new venture will generate value for stakeholders. The
business model is reflected in a business plan that describe in more details the most
important aspects of the business. The second step is validating and analyzing the
feasibility of the business idea or the business model. At this stage the business idea,
prototypes and products can be tested with specific tools. It is important also for
entrepreneurs to validate the capacity of business model to generate value for
stakeholders.
The third step is to launch the new venture. The growth stages require
investments and financial capital and entrepreneurs have to identify and attract the
most suitable resources for the business. At this stage, the characteristics of the
business environment and influences of the contingency factors are extremely
important and may affect to a large extent the entrepreneurial process. Implementation
of the business plan into a new venture involves identifying and acquisition of needed
resources, defining organizational structures and assessment of any legal aspects of the
organizational activities. At this stage, the new founded organization becomes visible
within the business sector. The strategy developed in the second stage begins to be
carried out, start-up defines its organizational boundaries, and the next step is to start to
combine available resources in order to achieve strategic objectives. Entrepreneurs
have to build organizational structure, the team and human resources skills and
competences must be defined and developed. Entrepreneurs leadership styles and soft
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skills are very important at this stage because team are formed and are established the
values and other organizational factors of new venture future success.
Business idea incorporation and business plan implementation is an
independent step in the entrepreneurial process which do not often generate growth or
immediate results. In most cases, following the steps of the entrepreneurial process
involves increasing the complexity of business activities the entrepreneur will face.
Increasing complexity is determined by contingency factors that entrepreneur must
take into account in the process of business development. Entrepreneurs have to choose
between complexity of business growth and stability afforded by a smaller size of the
organization. The reasons for this decision stems from the entrepreneurs desire to
maintain control over the organization and informal relationships with team members.
A smaller organization such as start-ups is easier to be managed because the
organizational structure is flattened and organizational flexibility is higher.
Entrepreneurs have to manage the balance between stability generated by the small size
of the organization and complexity generated by business grow and development. A
lack of growth and development can have adverse consequences on a start-up, while
keeping a balance between business development and organizational agility and
flexibility is extremely important. Creating this balance depends largely on
entrepreneur’s skills, competencies and capabilities.
Transition from the stage of new venture formation to business growth stages
requires a more comprehensive approach to business and a different view of
contingency factors. In the first stage of growth the entrepreneurial strategy should
focus on strengthening the organizational structures and identification of the most
appropriate funding sources. Entrepreneurial strategy must define which capacities,
capabilities and resources organization should develop to be competitive on the market.
Managerial skills of the entrepreneur becomes useful during the stages of business
growth and a controlling system can be useful for initial and further planning.
The success of business growth stages depends on entrepreneur’s strategic
vision, entrepreneurial strategies implementation and the way in which entrepreneurs
translate the strategic objectives in operational ones. In the growth stages startups will
capitalize their potential and the company will be more competitive in the business
sector. In this stages entrepreneurs will become managers and complexity of business
activities and processes will increase. When a business grow a manager have to
manage complex situations. Organizations also evolve in the growth stage and
organizational structures and processes become more complex. The core competencies
of organizations have to be developed during the launch and growth stages and will
provide the strengths for the business to be competitive on the market. Accelerated
growth, specific for information technology startups is based on innovation and
supported by financial resources that allows them to go through the growth stages.
Another important factor on which the entrepreneur must reflect is
organizational culture. The values promoted by organization, working values, routines,
culture of collaboration and performance can bring a contribution to sustained business
growth. In information technology organizations, human resource competences are the
core values and a very important component of business model which can generate
sustainable competitive advantage. Skills and employee competences can hardly be
imitated by competitors. Attracting and retaining the most competent employee’s, the
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progress through continuous learning, creativity fostering and collaboration are factors
that can provide organizational development and competitiveness. Employee’s
distinctive competences can be capitalize through collaboration to increase cohesion
and complementarity of skills, which will lead to synergies. Synergistic effects,
organizational flexibility and ensuring resources are the most important preconditions
to ensure future growth stages. Growth of a start-up is never accidental and is a
consequence of the strategic approach and entrepreneurial skills of the entrepreneur.
Start-up growth stages, classic or accelerated, are correlated with internal
organizational environment and with contingency factors in the external environment.
Startup strategic alignment of capabilities, capacities and resources with threats and
opportunities of business environment is extremely important. Understanding the
business sector and the main structural trends will contribute to the organization's
strategic alignment with business sectors, markets and to minimization of internal and
external contingency factors influences.
To make a competitive start-up and to grow their businesses entrepreneurs
have to understand the contingency factors and their influences. There are internal
contingency factors which can be managed by entrepreneurs and the external one.
There are various correlation between contingency factors inside and outside the
organization. For example, the discovery and exploitation of business opportunities are
possible if entrepreneur has the knowledge and entrepreneurial flair. Opportunities
could not be exploited if the organization would not have capabilities and capacities
through which resources are processed. Only discovering opportunities by an
entrepreneur will not be a guarantee of success for start-up. Exploiting opportunities
largely depend on entrepreneurial strategy and how entrepreneur will exploit
organizational capabilities and the mix of resources. Contingency factors from business
environment are the most difficult to counteract and to be managed. In the business
environment we can find social, economic, technical and technological factors,
governmental, environmental, political and legal contingency factors.
The success of entrepreneurial approach is largely attributed to the skills and
characteristics of the business founders, strategic vision and the way in which
entrepreneurs make decisions. Entrepreneur’s intentions and determination to grow
their business are important and reasons to starts a new venture fall into two categories:
opportunity entrepreneurs or necessity entrepreneurs. The first category are motivated
to develop a new business because they identified a business opportunity that can be
exploited. In the second category we can place entrepreneurs who develop their
business as a necessity or from emergency situation not from opportunities.
4. ENTREPRENEURIAL STRATEGY CONTINGENCY FACTORS
As regards the external environment, entrepreneurial process, as figure number
two reflected, is influenced by social, technological, economic, legal, political or
governmental and environmental factors. The level of specialization of human
resources is a very important contingency factor for startups in the field of information
technology. The level and number of information technology qualification and
certifications, and complementary skills are particularly important factors for
increasing the competitiveness of a startup. In the first stage of entrepreneurial process
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entrepreneurial education and acquired skills and competences are very important, also
individual characteristics such as acceptance of ambiguity, critical and creative
thinking, open minded and innovation culture promoter. In the stages of business idea
incorporation and growth the availability of competences and their complementarity
are needed to define the core of the start-up. Culture of collaboration as social value
has a significant impact in generating synergies across the organization. In the
entrepreneurial process, the social characteristics of entrepreneurs also have an
important role.
Figure no. 2 Entrepreneurial strategy contingency factors
Values, thinking, behavior, communication skills, socialization, adaptation and
interaction with other professionals in the business environment have an influence on
how entrepreneurs acts. The space where entrepreneurs manifest themselves is defined
by communities’ therefore social skills and competencies are particularly important.
Social relationships and networking are particularly useful resources and skills that can
be used in any stages of the entrepreneurial process.
For information technology entrepreneurs, analyzing the impact that it has the
technology in business development is important throughout entire business life cycle.
To understand the business opportunities, an entrepreneur who invests in information
technology should know and understand the principles that govern the industry. The
pace of information technology industry development is higher. The life cycle of
technologies shortened over time due to competition and increasing role of innovation
in business development. Competition and the clients’ needs diversification on the
market, have increased the pace at which organizations should innovate and bringing
new innovations on the market shortening the product life cycle. In the previous
paragraphs we argue that technology entrepreneurship in recent years are more
common on the third tier of the technology ecosystem. This level is application-
specific and innovative platforms being closer to the real needs of society and the
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initial investment is not so high. Starting a business on the third tier of a technological
ecosystem require access to technology, licenses, skills and know-how. Ensuring future
growth stages involves identifying all these resources in the business environment in
which the entrepreneur operates. The diffusion of new technologies in society is one of
the factors that significantly influence the success of a start-up phase since launch. The
peace of innovation must be correlated with the degree of absorption of innovative
products in economy and society. Countries with developed technological ecosystems
have a much greater capacity to absorb technological innovations. Know-how that the
founders of start-up can acquire it exceeds the social space and the acquisition of
technical skills is related to the technological ecosystem potential to generate all this
knowledge.
The influences of cultural factors are manifested as an attitude that society has
on entrepreneurship. The image of entrepreneurs in society and society's attitude
towards entrepreneurial failure have a significant impact on the number of new
businesses. Successful businesses are considered to generate value in society and in
economy. A positive attitude about entrepreneurship will generate a positive impact for
new startups. A mature business culture offers opportunities for entrepreneurs who
failed in their first new venture because failure is considered as part of the learning
process. In positive entrepreneurial cultures the failure it is not attributed to personal
characteristics of the entrepreneur, but contingence factors and how the entrepreneur
was able to make decisions interpreting information from the business environment. In
developed countries, technology entrepreneurial ecosystems have an important role in
value creation in the economy and society, therefore entrepreneurial culture can and
should generate a positive climate for new ventures.
As a correlation with other economic influence factors, creating an
entrepreneurial culture that encourages funding is crucial at all stages of the
entrepreneurial process. For new ventures the micro-loans, seed funding and business
accelerators programs can generate a context in which potential future entrepreneurs
have a greater determination to put their business ideas into practice.
Lack of information and knowledge about technology industry is one of the main
reasons why start-ups fail. It is necessary for entrepreneurs that before initiating a new
company to know in detail the industry and the market, clients and competitors. In this
process of researching entrepreneur should seek current and relevant information about
the industry, market and competitors and analyze them in depth. There are also very
useful information about selling and the dynamics of competitors in the last five years,
details about innovation and competitors’ business models. Entrepreneurs have their
own vision of key factors which influence the relevant industry segment as well as the
future trends of the business sector. The forecasting about the sector's ability to grow in
the next five years is also very useful in all the entrepreneurial process stages. To be
able to develop strategies, entrepreneurs needs accurate and complete information
about uniqueness of the main competitors in the business sectors and their capabilities
which ensures competitive advantages, potential weaknesses that can be exploited, and
other sources of competitive advantage. Any business sector have entry and exit
barriers. The entry barriers are specific on the every level of information technology
industry. More specifically, an entrepreneur who plans to launch a new business in the
first and second level will have to face high legal, financial and market entry barriers.
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Third level provides more opportunities and low entry barriers can be overcome easily.
On the third level of specific platforms, applications and online services is more easily
to launch a new venture because the initial investments are lower than on the first and
second levels. Business ideas, products and service can reach the customers more
easily through new online distribution channels.
In the entrepreneurial process, an entrepreneur must predict and understand the
trends and complementarity of specific information technology markets. There are
useful information about attractiveness, market size and segmentation, about the
growth potential of the target group, stages and characteristics of the industry, demand
typology, operating conditions on the market, the criteria that determine the
attractiveness of the market and the factors that have an influence on innovation and
technological development.
To be able to develop innovative business models that generate added value
and which is difficult to be replicated by competitors, entrepreneur must understand
and know in detail the competitors in the sector: direct and indirect competitors,
potential new competitors may influence relations arising within it. Proactive
entrepreneurs should understand the competitors: information about business models
that define strategies, the future directions of competitors’ development, customer
groups targeted by competitors, competitors the market share, cost structure and
competitors productivity and what are the most relevant sources of competitive
advantage in the business sector.
This work was co-financed from the European Social Fund through Sectoral
Operational Programme Human Resources Development 2007-2013, project number
POSDRU/159/1.5/S/134197 „Performance and excellence in doctoral and
postdoctoral research in Romanian economics science domain”.
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