Textbook 20kap 201 20english Web 20
Textbook 20kap 201 20english Web 20
Textbook 20kap 201 20english Web 20
WHAT IS ENTREPRENEURSHIP?
Entrepreneurship is around us all the time and we often talk about it. But what is it actually? How
would you define entrepreneurship? On the face of it, it might seem an easy task but it definitely is
not. By reading newspapers or watching television, you easily get the impression that entrepreneurs
are the heroes in our time. You are confronted with stories about the inventive hero who starts his
own organisation and as a result of this becomes rich and famous. Just think of Lars Larsen - the
story of a young and energetic man from a rural area in Northern Denmark who for small money
starts his own chain of bedlinen outlets. However, the message of this book is that entrepreneurship
is much more than starting an independent organisation. Entrepreneurship is a complex phenomenon
that takes place in many different contexts and the extent as well as the process and output differ.
The purpose of this chapter is first of all to define: What is entrepreneurship? There is not a single
answer to that question. The entrepreneurial phenomenon is wide and has many faces; there are
many entrepreneurships in terms of focus, definitions, scope and paradigms (Steyaert & Hjorth 2003:
5). A reason for the many different entrepreneurships is the fact that entrepreneurship is studied in
many different disciplines (economics, psychology, sociology, management etc.). In fact, every author
seems to have his own definition of entrepreneurship. By reference to Saxes (1916-1987) story of
the blind men who touch an elephant in different places (trunk, tail etc.) and as a result of this end up
telling completely different stories about the elephant, Gartner (2002) asks, Is there an Elephant in
Entrepreneurship?
You might think that entrepreneurship has no specific value for you. But think of the changes on the
labour market. The development moves towards more free agents, frequent job switching, a faster
technological development, more options and more unclear job structures. Effectively this means that
every one of us, to a greater extent than earlier, must act like entrepreneurs in educational and career
connections: We must to a higher degree create a career instead of just having a career. Normally,
we can choose between many educational offers and there are often more career tracks to follow
after having finished a study, for instance the choice between different wage earner existences and a
career as an entrepreneur. Earlier, it was more frequent that children picked the same career as their
parents, which meant that you were almost born to a certain career. Despite of the fact that it is still
possible to find such a career model today, the young generations are nowadays more challenged to
create their own future. As Down says, We are entrepreneurs of the self (Down 2006: 5). Therefore,
it is important to young people in general to know what entrepreneurship involves and be trained in it.
Last but not least, entrepreneurship is exciting. As an entrepreneur you participate in creating some-
thing new, typically in association with others who find it challenging and instructive working in the
pioneer phase where new things come into existence.
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tencies, which focus on the ability to plan, organise and coordinate. What the organisations want are
employees who are entrepreneurial, innovative, adaptable and creative. Thus, entrepreneurship is
also of value to you who are going to become an employee in an already existing organisation.
From this perspective, it is not surprising that it is a political objective to increase the numbers of
entrepreneurs in Denmark, especially the numbers of entrepreneurs who focus on growth. And there
is certainly room for improvement. With respect to the percentage of the population who starts new
organisations and the percentage of entrepreneurs who create growth, Denmark is lagging behind
the best countries (Schtt 2007).
In addition, entrepreneurship is famous for taking part in developing a healthy competition in the
economy because of the fact that the entrepreneur constantly pushes new ideas, products, services
and processes into the market. Indeed, new areas of business and markets emerge as a result of the
entrepreneurial behaviour. Alternative energy via wind turbines can be mentioned as an example of
a Danish entrepreneurial fairytale that has created a new area of business of great importance to our
ability to solve environmental and climate problems now and in the future.
Therefore, through entrepreneurship education, you come to understand a phenomenon that is excit-
ing and important to you, existing organisations and society. Do we need to say more? Entrepreneur-
ship is worth studying.
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A HISTORICAL FLASHBACK
Nothing comes to this world from nothing. All phenomena are part of a longer historical process of
learning. This feature also applies to entrepreneurship. Entrepreneurship also has a history. Let us
go on a journey back in time in order to delve into this history. You will gain a better understanding of
what entrepreneurship is and how the phenomenon can be defined. We have divided the field into
four traditions: 1) the economic tradition; 2) the social-psychological tradition; 3) the emergence tradi-
tion; and 4) the opportunity tradition.
Not until around 1755, does the entrepreneurial phenomenon get formally introduced in the litera-
ture of trade, economy and business development. Cantillon (1680-1734) is often emphasized as an
important pioneer within the entrepreneurial context (Landstrm 1999). To him, the function of entre-
preneurship was to equalize discrepancies between supply and demand by buying something cheap
for the purpose of selling it again at a price that as far as possible was higher. Therefore, the entre-
preneur is a person who is getting hold of and allocates resources by running a risk and consequently
balances the economy (Murphy et al. 2006). In the late 18th century, the concept of entrepreneurship
is extended to include a perception of the entrepreneur as a person who plans, supervises, organises
or even owns production factors. This perception is a contrast to how the 19th century distinguishes
between those who provide means and those who create profit (Coulter 2003).
An important person of the 20th century is Knight. He pinpoints that the entrepreneur should be able
to cope with certain aspects of uncertainty (Sarasvathy et al. 2005)
The first type of uncertainty appears when different outcomes in the future both exist and are
known. In such case, it is required of the entrepreneur to calculate the possibilities and make deci-
sions on the basis of those. It might be compared with the way in which meteorologists determine
when the sun rises and sets.
The other type of uncertainty appears in cases when the outcomes of the future exist but are
unknown in advance. An example could be your own dying day. You know that you shall die but
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when it will be is unknown. In these situations, the entrepreneur will have to estimate the outcome
of the future in the light of experiments that have been repeated over and over again and finally
make decisions in the light of those.
The last type of uncertainty, which Knight refers to as the true uncertainty, appears when the
outcomes of the future are not existing which means that it is not possible to know anything about
them. The entrepreneur receives profit as compensation for coping with the true uncertainty.
So the entrepreneur is willing to spend time, capital and risking his career by dealing with uncertain
projects. He or she is the investor, the owner of the economic resources. Uncertainty is present in
each economy because decisions about input must be made immediately in order to create output
in the future where the demand is an unknown factor. The consumer is not willing to commit himself
or herself to an uncertain demand in the future which leaves the investor in a risky position (Casson
1982).
Anyway, it is the function which Schumpeter (1934) attributes to the entrepreneur that really has
given rise to todays understanding of entrepreneurship. According to Schumpeter, the economic
uncertainty does not attribute to the entrepreneur as a capitalist who allocates means to the entre-
preneur. Instead, the entrepreneur is an innovator who by combining something existing creates new
opportunities and organisations in the economy he or she is the main source leading to the devel-
opment of the economy. Schumpeter presupposes that the starting point is a balanced economy until
an entrepreneur by combining something existing creates new opportunities and thereby creates an
imbalance in the market. But at the same time the imbalance contributes to the development of the
economy. The new opportunity can be:
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Schumpeter assumes that the new factors will oust existing organisations and create waves of
change in the economy. He talks about this process in terms of creative destruction. All the time, new
projects and organisations are created while others close down. If an entrepreneur is successful, imi-
tators will imitate the entrepreneur and enter the market. In line with the fact that the market becomes
satisfied, a new equilibrium will emerge in the economy. Of course, critique can be raised against
Schumpeterian theory. One possible objection could be: Are the new things always better than the old
ones? Why is uncertainty not attached to the entrepreneurs actions? However, there is no doubt that
Schumpeter made a crucial point about the link between entrepreneurship, innovation and economic
growth.
By studying individual qualities, such as the need to achieve, one seems to ignore the influence
that personal qualities have on each other and how environmental factors tend to shape the entre-
preneurial behaviour.
In addition, the psychological perspective has given rise to so many personal characteristics and
factors that the entrepreneur has been characterized as an everyman.
Finally, the studies have not empirically made it possible to point out the entrepreneurial personal-
ity in the crowd. Especially the article: Who is the Entrepreneur? Is the Wrong Question (Gartner
1988), has contributed to the criticism of the psychological approach.
Over the years the psychological research tradition has been supplemented with a sociological tradi-
tion. The sociological tradition focuses on interpersonal relations more than on the individual. There-
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fore, it is possible to talk about a social-psychological tradition which is interested in man as an indi-
vidual and social entrepreneurial actor (Aldrich 1999). The social-psychological tradition will be further
discussed in chapter 2.
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characterized by the creation or identification of new objectives, means or means-ends chains, imply-
ing that emphasis is on the minority of organisations, either new or existing, which give rise to new
products, production methods, markets and reorganisations. This is based on opportunities that con-
tribute something new to the world that we already know. Thus, the concept of opportunity is a very
crucial concept to the opportunity tradition. Eckhardt and Shane define opportunity : as situations
in which new goods, services, raw materials, markets and organizing methods can be introduced
through the formation of new means, ends, or means-ends relationships (Eckhardt & Shane 2003:
336).
A complementary approach
The literature on entrepreneurship supplies us with many different suggestions for the way in which
the entrepreneurial process is likely to be perceived. Some think that this process can be illustrated
as a phase or life cycle sequence. From this point of view, all entrepreneurial processes develop
through the same phases which it is possible to point out in advance. Some examples of these phas-
es are: 1) initiation, 2) development, 3) growth 4) maturity and 5) decline (Kroeger 1974). Reynolds
(1997) suggests the following phases: 1) conception, 2) gestation, 3) infancy 4) adolescence. In spite
of the fact that it is assumed that the phases attributing to these models are universal, the phases
vary in number and content across the different models.
Today, the emergence and opportunity traditions represent two dominating perspectives in the entre-
preneurial research, aiming to improve our understanding of the entrepreneurial process. They are
often presented as competing perspectives. However, the starting point of the book is that the two
traditions can be encountered as complementary. The argument is that the entrepreneurial process
in practice involves emergence (discovery or creation) of opportunities, evaluation of opportunities as
well as organisation of opportunities. Opportunity emergence means that the entrepreneur discovers
or creates a business opportunity, for instance by combining something already existing into a com-
pletely new or improved product. On the other hand, opportunity evaluation focuses on the evaluation
of the opportunity in relation to whether it is attractive or not to the market. Opportunity organising
appears when the entrepreneur attempts to make use of the opportunity by implementing it so the
market actors can be aware of it, understand it and act in accordance with it.
The fact that the emergence and opportunity tradition can be encountered as complementary ap-
proaches is also pinpointed by Bygrave and Hofers definition of the entrepreneur: He or she is a
person who perceives an opportunity and creates an organization to pursue it (Bygrave & Hofer
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1991: 14). Or Shanes (2003) perception of the essence of entrepreneurship: Entrepreneurship is
an activity that involves the discovery, evaluation and exploitation of opportunities to introduce new
goods and services, ways of organizing markets, processes and raw materials through organizing ef-
forts that previously had not existed (Shane 2003: 4).
The complementary nature that characterizes the two traditions can be illustrated by the establish-
ment of a new association. Associations often reflect a political interest among a group, as for in-
stance students who are interested in environmentalism or the relation between industrialized and
developing countries. A group of politically engaged students might for instance consider how to
optimize their opportunities for influencing top decision-makers through establishment of a new asso-
ciation. What might be important here is to consider whether there is room left for one more student
association traditionally established, or if there is an opportunity for an alternative way of organising
through for example a virtual network. From the perspective of the emergence tradition, it is possible
to understand this case as a traditional collective organising process while from the perspective of the
opportunity tradition it could be perceived as a different and new way of organising an association.
Both traditions hence contribute to the understanding of a specific case.
Figure 1.1 illustrates the perception of entrepreneurship applied in this book as a three-part process
that involves emergence, evaluation and organising of opportunities. Thus, both the emergence and
opportunity traditions are in play. The figure is designed as a spiral to underpin that the book dissoci-
ates itself from the idea that the process is linear. The process is not made up of clear and definable
phases that naturally build on each other. Instead, it is often iterative, parallel and overlapping.
Mulighedsudnyttelse gennem
organisationsdannelse
Mulighedsevaluering
Opdagelse/skabelse
af muligheder
Chapters 3, 4 and 5 will go into details about this figure. Chapter 3 focuses on opportunity emergence
and the perspectives of discovery or creation. Chapter 4 deals with opportunity evaluation and chap-
ter 5 focuses on opportunity exploitation through organising.
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Core topics
The processes linked to emergence, evaluation and organising of new opportunities are extremely
complex. Different factors play a part, such as environments, demography, the entrepreneurs previ-
ous experiences, career, personality, self-perception, strategic decisions etc. Particularly, the book
wants to emphasize four topics that influence the process. The topics are: 1) the individual, 2) re-
sources, 3) networks and 4) the business plan. The topics are illustrated in figure 1.2.
Resources
Opportunity organising
The Individual
Opportunity
Networks
evaluation
Opportunity emergence
Why are these topics important? The entrepreneurial individual is of great importance for the devel-
opment of entrepreneurship. After all, it is the individual or a smaller group of individuals who take
the initiative and carry through the process. And imaginative and creative processes take place in the
minds of individuals.
Resources are important inputs in the attempt towards discovering or creating a new opportunity and
organising it. They are the material that is the starting point for entrepreneurship. Resources are likely
to be encountered broadly as human, social and financial resources.
Social relationships networks are of great importance. In spite of the fact that entrepreneurship
in many ways is a lonely journey, it is emphasized over and over again that this process to a higher
extent is a network journey. The entrepreneur constantly interacts with others (bank employees, po-
tential customers, advisers and other entrepreneurs etc.) and creates networks. These networks are
absolutely crucial in the sense that they give him or her access to knowledge, resources etc. which
are essential to the development of entrepreneurship.
The business plan perceived as a written document is not necessarily a part of all entrepreneurial
processes but a certain degree of planning is present in all of these processes. The business plan is
also likely to have different meanings. At times, its meaning is to create a foundation for the acquiring
of resources or for the evaluation of the entrepreneurial process. At other times, the purpose of the
business plan is to support the entrepreneur in the planning process.
As it appears from the table of contents, chapters 2, 6, 7 and 8 of the book will treat each of the four
topics in more detail which explains why they are only superficially touched upon here. Thus in the
process of reading the book, you will not only gain a greater insight into crucial activities in the entre-
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preneurial process, namely the emergence, evaluation and organising of opportunities, you will also
come to understand the important topics which influence these activities.
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sure that you have packed your suitcase with the right concepts. Therefore we supply you with an
overview of crucial concepts which are essential for your understanding of the book.
Entrepreneurship = Broad concept that generally speaking can be defined as: discovery or cre-
ation of new opportunities which are evaluated and exploited through organising
The emergence tradition = A tradition within the context of entrepreneurship that emphasizes: the
creation of new organisational structures which function as a frame for an opportunity related to a
specific market demand
The opportunity tradition = Another tradition within the context of entrepreneurship that focuses
on: the break with existing structures via identification and creation of new opportunities
The entrepreneurial process = The movement from discovering or creating an opportunity to
evaluation of the opportunity to finally exploiting it through organising
Entrepreneur/intrapreneur = The individual who initiates, strives for and organisess entrepreneur-
ship
Paradox = A conflicting statement which will be introduced in the book as two conflicting theoreti-
cal perspectives
Perspective = A theoretical approach which represents one of the two statements that pertain to
the paradox
Opportunity = An idea which is evaluated as capable of creating value for others
Opportunity emergence = The process in which the opportunity emerges led by individuals who
discover or create the opportunity
Opportunity evaluation = The process in which the entrepreneur evaluates to what extent the idea
represents an attractive opportunity
Opportunity organising = Creation of some meaningful structures that support the realization of
the opportunity, for instance to collect resources, to coordinate activities and to involve others so
that the wanted output can be obtained
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