Adigrat University

College of Engineering and Technology

Department of Mechanical Engineering

Course: Entrepreneurship for Engineers

Instructor: Yonas G.

Chapter One
The Entrepreneur and the Entrepreneurial Venture

1
2
 I.Theories of Entrepreneurship (Bula,2012)
Theory View entrepreneurship/ Entrepreneur/ as

1.Cantillo
n's theory an agent that takes on risk and
(1755)
thereby equilibrates supply and demand in the
economy

2.Schultz is closely connected to situations of disequilibria and

Approach
(Schultz, that entrepreneurship is the ability to
1975)
deal with these
situations. entrepreneurship exists in all aspects of 3
 I. Some Entrepreneurship Theories (Bula,2012)
Theor View entrepreneurship/ Entrepreneur/ as
y
3.A the AMP was based on three main conceptualizations (Kirzner,
ust 1973).The first was the arbitraging market in which opportunities
ria emerge for given market actors as others overlook certain opportunities
n or undertake suboptimal activity. The second was alertness to profit-
Ma making opportunities, which entrepreneurs discover and
rke entrepreneurial advantage. The third conceptualization, following Say
t (1803) and Schumpeter (1934), was that ownership is distinct from
Pro entrepreneurship. In other words, entrepreneurship does not require
ces ownership of resources, an idea that adds context to uncertainty and
s(A risk (Knight, 1921).
M
P): 4.1 Kirzner Theory (1997) claims that initially the economy is in a
- constant state of disequilibrium due to shocks constantly hitting the
(A economy and the competition among 'alert' entrepreneurs leads to
Kir equilibrium.
zne
r's
"al 4
ert
 1. Some Entrepreneurship Theories
Theor View entrepreneurship/ Entrepreneur/ as
y
4.2

. entrepreneurship as “a creative activity”. It is innovation and
C not imitation. An innovator who brings new products or services
r into economy is given the status of an entrepreneur.
e
 He regarded innovation as a tool of entrepreneur,
a
t Schumpeter's innovator as an economic and social leader
i does not care much about economic profits and only joy he gets
v from being an
e
innovator and being a server to his society.
d He believes that entrepreneurs are primarily motivated by an
e atavistic will to power, will to found a private kingdom or will to
s conquer. Hence, The entrepreneur is viewed as the „engine of
t 5
r growth‟.
 I. Some Entrepreneurship Theories
Theor View entrepreneurship/ Entrepreneur/ as
y
4.
2The concept of innovation and its corollary development embraces five
. functions: 1) The introduction of a new product with which consumers
Care not yet familiar or introduction of a new quality of an existing
rproduct, 2) The introduction of new method of production that is not
eyet
a
tested by experience in the branch of manufacture concerned, which
tneed
iby no means be founded upon a discovery scientifically new and can also
v
exist in a new way of handling a commodity commercially, 3) The
e
opening of new market that is a market on to which the particular

dbranch of manufacturer of the country in question has not previously

eentered, whether or not this market has existed before, 4) Conquest of a
snew source of supply of raw material and 5) The carrying out of the new
t organisation of any industry. 6
 I. Some Entrepreneurship Theories
Theor View entrepreneurship/ Entrepreneur/ as
y
4.
3  He views an entrepreneur in terms of Risk, Uncertainty
K and Profit. Knight recognized the distinction between
ni
gh risk and
t’s
A uncertainty. The latter is uninsurable since it relates to
pp
unique events, e.g. a shift in consumer taste. He explicitly
ro
ac argues that entrepreneurs are owners of companies,
h
(K i.e., residual
ni claimants, and thus receive profits.
gh
t,  To earn a positive profit, the entrepreneur carries out three
19
tasks: (1) he initiates useful changes or innovations; (2) he
71
) adapts to changes in the economic environment; and (3) 7he
 1. Some Entrepreneurship Theories
Theor View entrepreneurship/ Entrepreneur/ as
y

5. The level of analysis in psychological theories is the individual (Landstrom, 1998).

They emphasize personal characteristics that define entrepreneurship. Personality
traits need pfor achievement and locus of control are reviewed and empirical
s
evidence presented for three other new characteristics that have been found to be
associated with entrepreneurial inclination. These are risk taking, innovativeness,
y for ambiguity.
and tolerance
c Trait Theory: Coon (2004) defines personality traits as “stable
7.1 Personality
qualities that
h a person shows in most situations”. there are enduring inborn
qualities or potentials of the individual that naturally make him an entrepreneur.
Some of theo characteristics or behaviors associated with entrepreneurs are that
they tend tol be more opportunity driven (they nose around), demonstrate high
level of creativity and innovation, and show high level of management skills and
o
business know-how. They have also been found to be optimistic, (they see the
cup as half gfull than as half empty), emotionally resilient and have mental energy,
they are hard workers, show intense commitment and perseverance, thrive on
i
competitive desire to excel and win, tend to be dissatisfied with the status quo and
c
desire improvement, entrepreneurs are also transformational in nature, who are life
long learnersaand use failure as a tool and springboard. They also believe that they
can personally make a difference, are individuals of integrity and above all
visionary. l
8
 I. Some Entrepreneurship Theories
Theor View entrepreneurship/ Entrepreneur/ as
y

5 7.1.1 Locus of Control (Julian Rotter 1950)

Locus of control
. is an important aspect of personality. Rotter (1966) refers to Locus
of Control as an individual’s perception about the underlying main causes of
events in his/her life. In other words, a locus of control orientation is a belief about
whether thepoutcomes of our actions are contingent on what we do (internal control
orientation) or on events outside our personal control (external control orientation).
s
In this context the entrepreneur’s success comes from his/her own abilities ( called
y of control) and also support from outside called external locus of
internal locus
c individuals with an internal locus of control believe that they are able
control. While
to control life events, individuals with an external locus of control believe that life's
h result of external factors, such as chance, luck or fate.
events are the
o of control is an entrepreneurial characteristic have been reported in
internal locus
the literature
l (Cromie, 2000, Ho and Koh, 1992; Koh, 1996; Robinson et al., 1991).
In a student sample, internal locus of control was found to be positively
o the desire to become an entrepreneur (Bonnett & Furnham, 1991).
associated with
Rauch and g
Frese (2000)i also found that business owners have a slightly higher internal locus of
control than other populations. Other studies have found a high degree of
c competitive aggressiveness, and autonomy reports (Utsch et al.,
innovativeness,
a as risk taking (Begley & Boyd, 1987).
1999); as well
l 9
 I. Some Entrepreneurship Theories
Theor View entrepreneurship/ Entrepreneur/ as
y
5 7.2 Need for Achievement theory : McClelland (1961)
.
 While the trait model focuses on enduring inborn qualities
and locus of control on the individual's perceptions about the
p
rewards and punishments in his or her life, (Pervin,
1980,), s need for achievement theory by McClelland (1961)
y that human beings have a need to succeed,
explained
c excel or achieve. Entrepreneurs are driven by this
accomplish,
h
need to achieve and excel.
high needo for achievement drives people towards
l
entrepreneurial activities. achievement motive is inculcated
through ochild rearing practices, which stress standards of
g material warmth, self-reliance training and low
excellence,
i
father dominance. Individuals with high achievement motive
tend to cbe enthusiastic (passionate) for responsibility and a
concreteameasure of task performance. 10
l
 I. Some Entrepreneurship Theories
Theor View entrepreneurship/ Entrepreneur/ as
y
5 7.2 Need for Achievement theory : McClelland (1961)
Achievement. motivation may be the only convincing personological
factor related to new venture creation (Shaver & Scott, 1991). Risk
taking andp innovativeness, need for achievement, and tolerance
for s
ambiguity y had positive and significant influence on entrepreneurial
inclination
c Mohar, Singh and Kishore (2007). The construct locus of
control was
h also found to be highly correlated with variables such as
risk taking, need for achievement, and tolerance for ambiguity.
o
aversion lto risk declines as wealth rises, that is, one’s net assets and
value of ofuture income (Szpiro, 1986). Eisenhauer(1995) suggests
g in entrepreneurship, by increasing wealth, can reduce
that success
i
the entrepreneur’s degree of risk aversion, and encourage more
venturing.
c In his view, entrepreneurship may therefore be a self
perpetuating
a process. some entrepreneurs exhibit mildly risk-loving
behavior (Brockhaus, 1980).These individuals prefer risks and
l
challenges of venturing to the security of stable income. 11
 I. Some Entrepreneurship Theories
Theor View entrepreneurship/ Entrepreneur/ as
y
6. focuses on the social context. Entrepreneurial ventures are clearly
S social entities, because even solo ventures implicitly involve a choice
o not to share ownership with others in the founding process.
c Enterprises can be formed as a result of teams.
i Entrepreneurship has a psychological contract involving a give and
o take
l „transactionionary‟ relationship in form of teamwork involving two or
o more individuals who jointly establish a business during the pre-start-
g up phase of the firm, before it actually begins making its goods or
i
services available to the market.”
c
Bird (1989) postulate that there are psychological benefits derived
a
l from relationships between team members Unlike a solo entrepreneur,
who must bear the burden of making decisions and facing their
E consequences with no one else to blame, entrepreneurial teams spread
n the responsibility across individuals. Francis and Sandberg (2000: 6)
t noted that friendships “may hold teams together and stimulate heroic
r efforts during difficult times.”
e 12
6. Sociological Theory of Entrepreneurship: Reynolds (1991) identified
four social contexts that relates to entrepreneurial opportunity.
1)Social networks. the focus is on building social relationships and bonds
that promote trust and not opportunism. In other words, the entrepreneur
should not take undue advantage of people to be successful; rather success
comes as a result of keeping faith with the people.
2)Life course stage context:- involves analyzing the life situations and
characteristic of individuals who have decided to become entrepreneurs.
The experiences of people could influence their thought and action so they
want to do something meaningful with their lives.
3)Ethnic identification:- One’s sociological background is one of the
decisive “push” factors to become an entrepreneur. Marginalized groups
may violate all obstacles and strive for success, spurred on by their
disadvantaged background to make life better.
4)Population ecology:- environmental factors such as political system,
government legislation, customers, employees and competition play an
important role in the survival of businesses or the success of the
entrepreneur. 13
 I. Some Entrepreneurship Theories
Theor View entrepreneurship/ Entrepreneur/ as
y
Ant Anthropology is the study of the origin, development, customs, and beliefs of
hro a
pol community. Or the culture of the people in the community.
ogic it emphasises the cultural entrepreneurship model which says new venture is
al created by the influence of one’s culture.
7.E Cultural practices lead to entrepreneurial attitudes such as innovation that also lead to
ntre venture creation behavior. Individual ethnicity affects attitude and behavior
pre (Baskerville, 2003) and culture reflects particular ethnic, social, economic, ecological,
and political complexities in individuals (Mitchell et al., 2002a). Thus, cultural
neu
environments can produce attitude differences (Baskerville, 2003) as well as
rshi
entrepreneurial behavior differences (Nort, 1990; Shane 1994).
p
The
ory

8.Opp Entrepreneurs do not cause change (as claimed by the Schumpeterian or Austrian
 1. Some Entrepreneurship Theories

Theor View entrepreneurship/ Entrepreneur/ as

y
9.
RBET argues that access to resources by founders is an
R
e
important predictor of opportunity based entrepreneurship
s
and
o new venture growth (Alvarez & Busenitz, 2001).It
u
stresses the
r
importance
c of financial, social and human resources (Aldrich,
e
1999). Thus, access to resources enhances the individual’s
-
ability to detect and act upon discovered
B
opportunities
a
s
(Davidson & Honing, 2003). Financial, social and human 15
e
 1. The Entrepreneur and Entrepreneurial Venture
1.1 Entrepreneur:- The concept of entrepreneurship has been around as long as man has existed.
 Schumpeter(1991) defines entrepreneur as someone who
establishes a new business to produce a new product or to make an
old product in a new way. For him the entrepreneur takes the center
stage of socioeconomic development. He takes the role of
socioeconomic leader since he has the ability to decide, to direct, to
push matters through.
 Schumpeter's analysis progress does depend on the "great man"
and as an innovator, economic and social leader the entrepreneur
by definition is a monopolist. Since the entrepreneur is the
engine of the economic progress in the capitalist system,
monopolies should be encouraged to lead to new innovations
 In Schumpeter’s scheme, enterprise is the activity of carrying out
innovations, and the individuals who do so are the entrepreneurs
16
1.1 Entrepreneur
The entrepreneurship ability is scarce and the business of
entrepreneurs is too risky. AS they undertake the economic activities
that lie outside of the routine tasks under the social and economic
resistant environments their activities should be encouraged and
protected to reduce the risk they take. Entrepreneurial risk and
uncertainty are reduced by large scale enterprise and restrictive
practices such as patents.
Thus the reward of innovations and taking entrepreneurial risky
activities is profit. The profit for Schumpeter is the result of
innovation and also the inducement to innovation and only the
capitalist system allows the successful entrepreneur to take profit.
However, for Kirzner (1997):"The entrepreneur who 'sees'
(discovers) a profit opportunity, is discovering the existence of a gain
which had...not been seen by himself or by anybody else.“ To
Kirzner, profit opportunities stimulate entrepreneurship.
17
 1.1 Entrepreneur
 the implementer of entrepreneurship is a man, who has his own ideas,
desires, motives, and attitudes, which lead him to doing business, to
found a company, to become a self-employer" (Flešková, Babiaková,
Nedelová, 2011).
 entrepreneur is one who organizes a new venture, manages it, and
assumes the associated risk. Entrepreneur is broadly defined to include
business owners, innovators, and executives in need of capital to start a
new project, introducing a new product, or expanding a promising line of
business (Price, 2004) in (Tagrafa & Akinb, 2009).
 the entrepreneur is define as the activity of creating and
implementing a new business entity, the prototypical small firms
(Metcalfe, 2004) in (Tagrafa & Akinb, 2009).

18
1.1 Entrepreneur
Six main components are proposed for inclusion in a definition of
the entrepreneur: (1) innovation, (2) opportunity recognition, (3) risk
management, (4) action, (5) use of resources, (6) added value (Filion,
2011).
Evans(2002)-an entrepreneur is an individual who organizes,
manages, & supervises issues related to the production for the supply
of goods and services. Moreover, personality traits such as self
confidence, creativity, persistence, calculated risk taking capacity,
need for achievement, individuality, leadership, versatility, optimism
& liking for challenges characterizes the entrepreneurial person
(Suresh, 2011).
19
1.2 Entrepreneurship

it is about creating new realities; transforming ideas into new

ventures, and transposing old ideas into new situations (Nicholson &
Anderson, 2005).

It focuses on newness and novelty in the form of new products, new

process, and new markets as the drivers of wealth creation. Somewhat
differently suggested that discovering and exploiting profitable
opportunities is the foundation for wealth through
creation
entrepreneurship. Both of this viewpoints agree that opportunity
recognition through entrepreneurship (Ireland et al., 2003). Cited in
Tagrafa & Akinb, 2009).
20
1.2 Entrepreneurship

 The Global Entrepreneurship Monitor(GEM)

operationalized the concept of entrepreneurship as “any
attempt at new business or new venture creation, such as self-
employment, a new business organization, or the expansion
of an existing business, by an individual, a team of
individuals, or an established business.” (Daniels, Herrington
& Kew, 2016).
 The self-employed are considered those working on their
own-account and they often own and control their own
21
business (Garrido, 2014).
1.3 Entrepreneur as an Individual
VIQ. What are the personal characteristics of Successful Entrepreneurs ?

 There are some general personality traits that are key for being an
entrepreneur (Perseus Publishing Staff, 2003).
 The most important personal qualities for an entrepreneur are: courage,
self-reliance, responsibility, determination, perseverance, proactive
approach, creativity and scholarship in a particular area, where this
entrepreneur intends to do business (Deáková, Drážovská, Grznárik and
Kondášová ,2010).
 Decision to take on the business risk is symptomatic of a certain type of
people. A significant part of the motivation to take risks in business
follows from the success motivation (Kvietok ,2013).
22
1.3 Entrepreneur as an Individual
 To achieve the set goals, successful people are willing to take on
reasonable risks associated with feedback about the level of achieved
results. Entrepreneurs are sort of being managed with an inner feeling,
they feel that their personal fate is the result of their own efforts. They are
independent, autonomous, and rely on themselves.
 Entrepreneurs differ from the general population and from paid employees in a
lot of characteristics. They are more individually oriented; they have a greater
individual responsibility and effort (Beugelsdijk and Noorderhaven,2005).
 In this context the inclination to take risks, self-efficacy and the need for
independence are the most important factors affecting personal performance of
the businessman Omerzel and Kušce (2013).

23
1.3 Entrepreneur as an Individual

 Individuals who demonstrate increased risk aversion are more

likely to become entrepreneurs (Hvide, Panos, 2014).
 Generally, the characteristics of entrepreneurship have been
determined as being innovative, risk taker and creative; having
vision and capability of flexible working and being focused on
higher level of success (Tagrafa & Akinb, 2009).
 Entrepreneurs always take a place in the front row while forming
innovations and making the dreams come true. (Tagrafa & Akinb,
2009).

24
1.3 Entrepreneur as an Individual

 Most successful entrepreneurs have a set of characteristics that sets

them apart from most other business people-
 For example, resourcefulness and a concern for good, often
personal, customer relations; have desire to become their own
bosses and enjoy taking risk; a strong need for personal freedom
and opportunity and for the type of creative expression that often
goes with owning & operating one’s own business. Related
characteristics- flexibility and ingenuity in responding to changes
in the marketplace Griffin, (2002).

25
 1.3 Entrepreneur as an Individual

 Two main elements of entrepreneurship are identified: the ability

to recognize business opportunities and the ability to take
calculated risk (Lunnan etal.,2006), (Zimmerer & Scarborough,
1998). Miller,1983 added pro-activeness traits and renovation to
the entrepreneurship characteristics.
 the psychological profile of entrepreneurs includes a need for
independence, achievement and recognition, internal locus of
control and a risk-taking propensity (Kent et al.,1982), (Stoner & Freeman,
1992), (Ufuk & Ozgen, 2001).

26
 1.3 .1 six personal Competencies of Successful Entrepreneurs (Frese ,2000)
Entrepreneurs that acquired the appropriated entrepreneurial characteristics are likely to achieve their
business. As Frese (2000) mentioned about the “must have” entrepreneurial instincts, entrepreneurial
characteristics should consist of 6 characteristics.
1. Autonomy - it means the ability or expectation of entrepreneur to see and seize the
opportunity.
2. Innovativeness - it means having new concepts of productions, services, or processes
which could be applied to business’ benefit.
3. Risk Taking - it means willing to take risk without knowing the result of achievement.
Such as investing big amount of capital and asset to start business or loaning big amount
of capital in case of not having enough budget for investment.
4. Competitive Aggressiveness - it means the strong desire to win the competition by
giving all effort to do everything to be far ahead of competitors.
5. Stability and Learning Orientation - it means not being trembled by any business
circumstance. And being able to learn from past experiences or situations appropriately.
Achievement Orientation - it means being struggle to fin
Source:- Copyright
27
2015 Society of Interdisciplinary Business Research (www.sibresearch.org)
 3.3.2 Ten personal Competencies of Successful Entrepreneurs (10 PECs)

 the characteristics of a successful personal entrepreneurial characteristics

(PEC) of successful entrepreneurs refer to the desired traits, which enable an
entrepreneur to do what is expected of them and succeed in business.
 It is the combination of these characteristics that is required to enable
any one to perform effectively as an entrepreneur.
 It is possible for people to develop these characteristics and succeed in
their careers as entrepreneurs.
 Successful entrepreneurs have common characteristics, which are divided
into three clusters; achievement, planning and power (Buiza, 2012).
a) Planning Cluster : three characteristics
b) Achievement Cluster: five characteristics
c) Power Cluster : two characteristics
Copyright 2015 Society of Interdisciplinary Business Research (www.sibresearch.org)

28
 a) Planning Cluster

1) Information Seeking (IS):

 is having the urge to look for the required information in order to make an
informed decision, for example, selecting, starting and successfully managing
the desired business.
 This calls for the concerned person to personally seek and obtain information
regarding customers, suppliers, competitors as well as any other relevant
information that is required to enable the entrepreneur make decisions and
improve knowledge on his/her business.
 Does personal research on how to provide a product or service
 Consults experts for business or technical advice.
Source: 2015 Society of Interdisciplinary Business Research (www.sibresearch.org)

29
 a) Planning Cluster
2. Goal Setting(GS)
 GS is the ability of an entrepreneur to set clear and specific goals

and objectives. These goals and objectives are normally high and
challenging but at the same time, realistic and can be
attained,
given the resources that one has got at his/her disposal.
 Set goals that must be SMART (Specific, Measurable, Achievable
, Reliable and Time bound), meaningful and challenging.
 “Without goals, and plans to reach them, you are like a ship
that has set sail with no destination.” Fitzhugh Dodson, author
 Goals may be of Short term ( less than two years), medium term 5 years,
30
long term 10 years and above. EX.- write your SML personal goals.
3) Risk Taking

31
 3) Risk Taking

 Entrepreneurs are people who prefer taking moderate risks. Before

they commit themselves and their resources, they assess the risks
that are associated with a business opportunity that they have
selected, and their ability to manage them, the benefits that they
will realize and the challenges that they will face from the venture
to be undertaken.
 Entrepreneurs can earn profits as a result of taking risks and the
higher the risks, the higher the profits. However, entrepreneurs will
always prefer to take on those risks that they can manage.
2015, Society of Interdisciplinary Business Research (www.sibresearch.org)

32
33
a) Planning Cluster
4. Systematic Planning and Monitoring
 SPM is the ability to develop plans that will be used in monitoring
and evaluating the progress of the business.
 SPM helps the entrepreneur to carefully monitor his/her business‟
actual performance against desired performance and turn to other
alternatives whenever the need arises; so as to achieve his/her set
goals.
 Involves Plans by breaking large tasks down into time-constrained
sub-tasks. Revises plans in light of feedback on performance or
changing circumstances.
Source: 2015, Society of Interdisciplinary Business Research (www.sibresearch.org
34
 a) Planning Cluster
4. Systematic Planning and Monitoring
 Plans by breaking large tasks down into time-constrained
sub- tasks.
 Revises plans in light of feedback on performance or changing
circumstances.
 “I ain‟t Martin Luther King. I don‟t need a dream. I have a plan.” Spike
Lee,
actor and director.
 “Plan your next move because every step contributes
towards
your goal.”―Sukant Ratnakar, author and motivational speaker.
 “By failing to prepare, you are preparing to fail.” ― Benjamin
35
 b) Achievement Cluster

5. Opportunity Seeking :-
 This refers to the quality that enables the entrepreneur to see and
act upon new business opportunities even in situations where
other people see nothing but problems/hopelessness only.
 It also encourages him/her to seize unusual opportunities Review
of Integrative Business and Economics Research, for obtaining
the necessary resources such as financing, equipment, land,
workspace, technical assistance, etc, which will enable him/her to
implement his/her business ideas. (Chalermwan,2015) available
online www.sibresearch.org)
36
 b) Achievement Cluster

5. Opportunity Seeking :-

 It is the ongoing process of considering, evaluating,

and pursuing market-based activities
that are believed to be
advantageous for the firm.
 It is keeping an eyes open for new business opportunities.
 Successful entrepreneurs are obsessed with
problem- solving. they love troubleshooting to achieve
their goals .
 “Where the rest of the world sees problems,37
 b) Achievement Cluster

6. Demand for Efficiency and Quality

 This is the quality that enables an entrepreneur to do things that
meet or surpass existing standards of excellence or improve on
performance by striving to do things faster, better and cheaply. By
doing this, the entrepreneur remains ahead of others, makes more
profits and retains a growing market share.
 Entrepreneurs find ways to do things better, faster or cheaper;
Acts to do things that meet standards of excellence
 Develops or uses procedures to ensure work is completed on time
or that work meets agreed upon standards of quality
38
 b) Achievement Cluster

7. Persistence :
 This is the quality, which enables the entrepreneurs to develop
determination to have a thorough job done at any cost in
terms
of personal sacrifice.
 entrepreneur remains working towards the
achievement of his/her set goals.
 Takes action in the face of a significant obstacle.
 Takes personal responsibility for the performance necessary to
achieve goals and objectives.
39
b) Achievement
Cluster
8. Commitment to the work contract

 This is the ability to accept final responsibility for completing a job for
the customers. Customers expect entrepreneurs to perform and honour
their commitments. Therefore,the entrepreneur should do everything
possible to ensure that he/she fulfils the commitment with his/her
customers. It means joining the workers to work with them to ensure that
contractual commitments are fulfilled, the entrepreneur will do it.
 Makes personal sacrifice or expends extraordinary effort to complete a
job.
 Strives to keep customers satisfied and place long term goodwill over
short term gain

40
 c) Power Cluster
The power cluster is made up of the following two characteristics.

9. Persuasion & Networking (PN)

 This is the ability to link, convince and influence other
individuals, agencies and other groups in order to maintain
business contacts
at a high level. This will help or work for the cause of the business
in a positive manner to accomplish own objectives.
 entrepreneurs Use deliberate strategies to influence or
persuade others.
 Uses key people, as agents to accomplish own objectives.
 Acts to develop and maintain business contacts 41
Source- 2015 Society of Interdisciplinary Business Research (www.sibresearch.org)
c) Power Cluster

10. Independence & Self Confidence

 This refers to having a strong belief or confidence in

oneself and the ability to complete a difficult task

or

meet a challenge.

 Ability to deal with customers, suppliers, employees

42
1.4 Creativity and Innovation
 Schumpeter believes that human economic development is the
history of continuous creative destructions by entrepreneurs. The
entrepreneur is an innovator, not an imitator in the production and,
as an innovator, naturally he is monopolist. Since economic
progress comes from innovations, innovator monopolist should be
protected and entrepreneurship should be encouraged (Tiryaki
,2005).
 Schumpeter does not define those who are imitators or those
who simply recognize and respond to the new situations as
entrepreneurs unless their responses consist of forming new
firms to create new innovations (Ahmet Tiryaki ,2005).
43
1.4 Creativity and Innovation
 Schumpeter's entrepreneur plays the role of a revolutionary in
creation of new production functions and methods. Thus,
entrepreneurs create disequilibrium and this creative destruction is
possible only under capitalistic system.
 Innovation & creativity have become increasingly important
determinants of organizational performance, success, and longer-
term survival. They are the process, outcomes, & products of
attempts to develop and introduce new and improved ways of
doing things.

44
1.4 Creativity and Innovation
 According to Alpert (1993) “Innovations are the lifeblood of our
economic system”
 “Innovation is a critical driver of growth and prosperity. China’s
move up the rankings, and the U.S. drop, is a reminder that without
investment in education and research, trade tariffs aren’t going to
maintain America’s economic edge.”(Tom Orlik, Bloomberg Economics
chief economist,2020).
 Creativity and innovation can occur at individual, work team,
organization, or at more than one of these levels combined, but will
invariably result in identifiable benefits at one or more of these levels-of
analysis.
 Q. is creativity a competence, or a coincidence (twist of fate)?
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 1.4 Creativity & Innovation
 The creativity stage of this process refers to idea generation, and
innovation to the subsequent stage of implementing ideas toward
better procedures, practices, or products.
 creativity has been conceived of as the generation of novel and useful
ideas, while innovation has been argued to be both the production of
creative ideas as the first stage, and their implementation as the second
stage (Amabile, 1996; Oldham & Cummings, 1996; Shalley & Zhou,
2008).
 creativity occurs not only in the early stages of innovation processes,
but there is a cyclical, recursive process of idea generation and
implementation (e.g., Paulus, 2002).
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1.4 Creativity & Innovation

 a stronger conceptual differentiation between creativity and

innovation have advocated (Oldham & Cummings, 1996; Rank,
Pace, & Frese, 2004).
 innovation may also include absolutely novel and radical ideas as
well as ideas that are less novel and more incremental (Zaltman,
Duncan, & Holbek, 1973)
 Hence, whereas creativity and innovation are related constructs,
they are by no means identical.

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 1.4 Creativity & Innovation:
 Theories of creativity and innovation
1.4.1 Componential Theory of Organizational Creativity & Innovation-
 work environments such as organizational motivation to innovate,
resources (including finances, time availability, and personnel
resources), and managerial practices impact creativity by affecting
components that contribute to creativity which represent a basic source
for organizational innovation (Amabile, 1997).
 There are three major components contributing to individual or small
team creativity: expertise, creative-thinking skill, and intrinsic
motivation.
 The role of motivation component as a psychological mechanism
underlying influences from the work environment on employees’
Creativity received empirical support unlike the other components
mentioned above.

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1.4.2 Interactionist Perspective of Organizational Creativity
 creativity is a complex interaction between the individual and
their work situation at different levels of organization (Woodman,
Sawyer, & Griffin, 1993).
 At the individual level, individual creativity is the result of
antecedent conditions (e.g., biographical variables), cognitive style
and ability (e.g., divergent thinking), personality (e.g., self-esteem),
relevant knowledge, motivation, social influences (e.g., rewards),
and contextual influences (e.g., physical environment).
 At the team level, creativity is a consequence of individual creative
behavior, the interaction between the group members (e.g., group
composition), group characteristics (e.g., norms, size), team
processes, and contextual influences (e.g., organizational culture,
reward systems).
 At the organizational level, innovation is a function of both
individual and group creativity (Woodman et al., 1993).
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1.4.3 Model of Individual Creative Action

 employees have to consider between two competing options- to

be creative or to undertake merely routine, habitual actions Ford
(1996).
 there are three groups of factors that might influence this
decision: sense-making processes, motivation, knowledge and
skills. Individual creative action is thus argued to be a result of
the joint influence of these factors, in the case any of them being
lacking, an individual would not engage in creative action.

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1.4.3 Model of Individual Creative Action

 The motivation to initiate a creative or habitual action is

further determined by goals, receptivity beliefs (e.g.,
expectations that creativity is valued–creative actions are
rewarded), capability beliefs (e.g. expectations that one is
capable of being creative or confident in creative ability),
and emotions (e.g., interest and anger as facilitators of
creativity whereas anxiety constraints creativity).
 This model is complex to empirically test as a whole that it
does not attract research attention like the former two
frameworks (a& b).
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 1.4.4 Theorizing on Cultural Differences and Creativity

The question of whether there are differences in creativity in different

cultures has significant implications for management practice,
international business and economic development (Morris & Leung,
2010; Zhou & Su, 2010).
However, theorizing and research in this regard have lagged behind
practical needs. This significant research-practice gap has led to
repeated calls for greater research attention on cultural differences
and creativity (Anderson et al., 2004; Shalley et al., 2004; Zhou &
Shalley, 2003), especially on similarities and differences in creativity
between the East and the West (Morris & Leung, 2010).

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 1.4.4 Theorizing on Cultural Differences and Creativity

Regarding individuals’ creativity, theorizing has focused on cultural

differences in individual creativity, such as how task and social
contexts moderate the relation between individuals’ cultural values
(e.g.individualism/collectivism, power distance, and uncertainty
avoidance) and creativity (Erez & Nouri, 2010), how culture
moderates influences of leaders, supervisors, coworkers, and social
networks on creativity (Zhou & Su, 2010), how culture influences
the assessment of creativity (Hempel & Sue-Chan, 2010), and how
culture affects the entire process of creativity (Chiu & Kwan, 2010).

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1.4.4 Theorizing on Cultural Differences and Creativity

team creativity, differs in terms of national culture. She suggests that

paternalistic organizational control fosters team intrinsic motivation
and creativity for teams in the East, whereas for teams in the West, such
organizational control acts as an inhibitor of group intrinsic motivation
and thus creativity.
This is one of the first models published in the mainstream
organizational science literature that takes a multi-level approach to
directly address the role of national culture as it may influence how
organizational control at the organizational level of analysis affects
team creativity at the team level of analysis.
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1.4.4 Theorizing on Cultural Differences and Creativity

 Even so, empirical examination of it has been rare, perhaps partly because its
multi-level theorizing requires that researchers collect data from a large number
of teams embedded in a good number of organizations in Eastern and Western
countries.
 On the other hand, conceptual works positing positive impact of teams’ cultural
diversity on team creativity have received more research attention and empirical
support (Stahl, Maznevski, Voigt, & Jonsen, 2009).
 Consistent with the “value-in-diversity” thesis in the diversity literature, this
line of work essentially argues that cultural diversity promotes divergence in
teams, and divergence leads to creativity (Stahl et al., 2009). While the above
works largely focus on creativity, the next two focus on innovation.
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1.4.5 Four Factor Theory of Team Climate for Innovation
 West (1990) posits four team climate factors facilitative of
innovation: vision, participative safety, task orientation and support
for innovation.
 Innovation is enhanced if
1) vision is understandable, valued and accepted by the team
members,
2) team members perceive they can propose new ideas and
solutions without being judged or criticized,
3) there is a stimulating debate and discussion of different possible
solutions within the team which at the same time will more likely
be carefully examined, and finally
4) team members perceive support for innovation (Anderson &
West, 1998; West, 1990).

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1.4.6 Ambidexterity Theory

 Ambidexterity refers to “the ability of a complex and adaptive

system to manage and meet conflicting demands by engaging in
fundamentally different activities” (Bledow et al., 2009a: 320).
 ambidexterity represents successful management of both,
exploration (e.g., creating new products) and exploitation (e.g.,
production and implementation of products).
 Some support has already been published for the major precepts of
ambidexterity theory (Rosing, Frese, & Bausch, 2011), and this
perspective therefore holds potential for future studies most
notably into leadership effects in innovation processes.

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THANK YOU…!!