Entrepreneurship and Innovation Theory, Practice and Context, Fourth Edition
By Tim Mazzarol and Sophie Reboud
Contents
1 Entrepreneurship as a Social and Economic Process …………….. 1
1.1 Introduction ………………………………………………………………… 1
1.2 The Benefits of Entrepreneurial Activity ………………………….. 3
1.3 Necessity and Opportunity Entrepreneurs ………………………….. 5
1.4 Attitudes Towards Entrepreneurship as a Career …………………. 8
1.5 The Pursuit of High-Growth Firms ……………………………………10
1.6 Global Trends in Entrepreneurship and Innovation ……………………….10
1.6.1 Shift from a ‘Managed’ to an ‘Entrepreneurial Economy’ ……………. 11
1.6.2 Rise of the ‘Knowledge Economy’ ……………………………. 11
1.6.3 Strategically Networked Innovation …………………………. 11
1.6.4 Globalisation ……………………………………………………….. 11
1.6.5 Low, Mid and High-Technology Innovation ………………… 12
1.6.6 Social Entrepreneurship and Innovation ……………… 12
1.7 What Is an Entrepreneur? ……………………………………12
1.8 The Entrepreneurship Domain …………………………… 13
1.9 Defining Entrepreneurship ………………………………..15
1.10 Managers, Entrepreneurs and Entrepreneurial Managers ………….. 16
1.10.1 Entrepreneurs and Small Business ……………………………… 18
1.11 Defining Innovation …………………………………………………. 19
1.12 Types of Innovation ………………………………………………… 20
1.13 Innovation Lifecycles …………………………………………………. 22
1.14 Sources of Innovation ……………………………………………… 24
1.14.1 Encouraging Entrepreneurship and Innovation ……………. 25
1.15 National Innovation Systems …………………………………… 26
1.16 Strategies to Encourage Entrepreneurship ……………………28
1.17 Strategies to Encourage Innovation …………………. 29
References ………………………………………………………………… 31
2 The Entrepreneur ………………………………………………………. 35
2.1 Introduction …………………………………………………………… 35
2.2 Common Characteristics of Entrepreneurs ……………………. 36
2.3 Are Entrepreneurs Born or Made? ………………………………….39
2.4 Entrepreneurial Motivation …………………………………………. 40
2.5 Models of Entrepreneurial Motivation ……………………………….. 41
2.6 Factors Influencing Entrepreneurial Behaviour …………………………… 43
2.7 The Influence of Life Stage on Entrepreneurial Learning and Behaviour ……….. 44
2.8 Measuring Entrepreneurial Characteristics …………………….. 46
2.9 General Enterprising Tendency (GET) Test ……………………….. 47
2.9.1 Need for Achievement …………………………………………….. 48
2.9.2 Creativity ………………………………………………………………. 48
2.9.3 Desire for Autonomy ……………………………………………………..48
2.9.4 Risk-Taking Orientation ……………………………………………….. 49
2.9.5 Internal Locus of Control ………………………………………………. 49
2.10 Awakening the Entrepreneur: Application of the GET Test ………….. 50
2.11 Entrepreneurial Orientation ……………………………………… 53
2.11.1 Measuring Entrepreneurial Orientation ……………………..54
2.11.2 Applying Entrepreneurial Orientation ………………….. 55
2.12 The Dark Side of Entrepreneurship ……………………….. 57
References ……………………………………………………………..58
3 The Entrepreneurial Process …………………………………….. 63
3.1 Introduction …………………………………………………….. 63
3.2 The Entrepreneurial Process ………………………………… 63
3.2.1 Opportunity Screening ………………………………………. 64
3.2.2 Marshalling Resources ……………………………………….. 65
3.2.3 Building the Capability of the Team ……………………………66
3.3 The Theory of Effectuation ………………………………………….. 66
3.4 The Entrepreneurial Process Model ………………………….. 68
3.5 3M Analysis for Opportunity Screening ……………………… 69
3.5.1 Market …………………………………………………………….. 69
3.5.2 Money ……………………………………………………………….. 70
3.5.3 Management ………………………………………………………… 72
3.6 The New Venture Creation Process ……………………………….. 73
3.7 A Study of the Process of Enterprise Formation ………………… 74
3.7.1 Actions Taken Prior to Launch or Abandonment ………….. 75
3.7.2 Triggers and Barriers to New Venture Creation ……………. 75
3.7.3 Implications of the Study ………………………………………. 77
3.8 The Importance of Creativity Management ………………..77
3.8.1 The Creative Thinking Process …………………………….. 78
3.8.2 Encouraging Creativity in the Workplace ………………….. 79
3.9 The Effects of Time Pressure on Creativity ………………… 81
3.10 Creating Rich Pictures ……………………………………….. 83
3.11 Applying Creativity Tools to Systems Thinking ………….. 84
3.11.1 Generators ……………………………………………… 86
3.11.2 Conceptualisers ………………………………………….86
3.11.3 Optimisers …………………………………………………… 86
3.11.4 Implementers ……………………………………………………. 86
4.15.3 Fostering Innovation in Public Organisations ……………… 121
4.15.4 Measuring Innovation in Public Organisations …………….. 123
4.15.5 Lessons from Innovation Within Public Organisations………… 125
References …………………………………………………….. 127
5 Innovation in Small Firms ………………………………………131
5.1 Introduction …………………………………………………….. 131
5.2 Definition of Small Firms …………………………………….. 132
5.3 Characteristics of Small Firms ………………………………. 134
5.4 The “Myth” of Innovation in Small Firms ……………………. 135
5.5 Advantages and Disadvantages of Small Firms ………………137
5.6 SMEs vs. Large Firms …………………………………………. 138
5.7 Less Formality in Small Firms ………………………………… 138
5.8 The Entrepreneur and the Owner-Manager ………………. 139
5.9 Theories of Small Business Management ………………….. 141
5.10 Causes of Small Business Failure and Success …………….144
5.11 The Growth Cycle of Small Firms ………………………….146
5.12 What Strategic Options Do Small Firms Have? ………..148
5.13 The Importance of Strategic Thinking ……………………150
5.13.1 Entrepreneurship ………………………………………….151
5.13.2 Innovation ……………………………………………………152
5.13.3 Strategic Networking ………………………………………154
5.13.4 The Growth Vector …………………………………….. 156
5.13.5 The Strategic Triangle …………………………………… 159
References …………………………………………………………….160
6 Adoption and Diffusion of Innovation …………………………165
6.1 Introduction ……………………………………………………… 165
6.2 Three Innovation Paradigms ……………………………………166
6.3 Generation and Diffusion of Innovation …………………… 168
6.4 Theories of Diffusion ……………………………………………..171
6.5 Why Innovations Diffuse into Markets ……………………… 174
6.5.1 Relative Advantage …………………………………………. 174
6.5.2 Complexity ……………………………………………………. 174
6.5.3 Compatibility ………………………………………………….. 174
6.5.4 Trial-Ability …………………………………………………….. 175
6.5.5 Observability ……………………………………………………. 175
6.5.6 Usefulness and Ease of Use ………………………………….. 175
6.5.7 Subjective Influences ………………………………………….. 175
6.6 The Critical Mass of Adoption …………………………………… 176
6.7 Diffusion of Innovation in Historical Context ………………… 177
6.8 Diffusion Adoption Patterns ………………………………….. 178
6.8.1 Venturesome Innovators ……………………………………… 179
6.8.2 Respectable Early Adopters …………………………………… 179
6.8.3 The Deliberate Early Majority ………………………………… 180
6.8.4 The Sceptical Late Majority …………………………………. 180
6.8.5 Traditional Laggards …………………………………………… 180
6.9 The Innovation Decision Process ………………………………. 180
6.10 Innovation Adoption in Organisations ………………………… 181
6.10.1 Managerial Intervention ……………………………………… 181
6.10.2 Subjective Norms ………………………………………………… 181
6.10.3 Facilitating Conditions …………………………………………. 182
6.10.4 Secondary (Individual) Adoption Process ………………….. 182
6.10.5 Assimilation …………………………………………………… 182
6.10.6 Consequences ……………………………………………………182
6.11 Rogers Innovation Adoption Model …………………………… 183
6.12 Innovation Diffusion as a Social Process ……………………… 184
6.12.1 Characteristics of the Innovation …………………………….. 185
6.12.2 Characteristics of the Innovator ………………………………… 185
6.12.3 Environmental Context in Which the Diffusion Is to Occur …. 185
6.12.4 The Role of Word-of-Mouth Communication …………186
6.13 The Failure of Innovation Diffusion ……………………….. 186
References ………………………………………………………………188
7 Planning, Business Models and Strategy …………………….. 191
7.1 Introduction ……………………………………………………………..191
7.2 The Value of the Business Plan ……………………………………. 192
7.3 Do Business Plans Really Matter? …………………………………..192
7.4 What Is Business Planning? …………………………………………194
7.5 Types of Business Plans …………………………………………….. 195
7.6 Writing a Business Plan …………………………………………….. 196
7.7 Designing the Business Model ………………………………………… 198
7.8 The ‘Business Model Canvas’ for Business Model Design ………… 200
7.8.1 Customer Segments and Market Segmentation ………………….. 201
7.8.2 The Customer Value Proposition (CVP) ……………………………203
7.8.3 Customer Relationships ………………………………………… 204
7.8.4 Channels – Your Go to Market Mechanism …………………. 205
7.8.5 Revenue Stream – Capturing Value …………………………….205
7.8.6 Key Resources ……………………………………………………… 207
7.8.7 Key Activities ………………………………………………………… 209
7.8.8 Strategic Partners ……………………………………………………..210
7.9 The Role of Vision ……………………………………………………….. 211
7.9.1 A Vision to Align and Motivate ……………………………………… 211
7.9.2 Don’t Confuse Planning for Clear Vision ………………………….. 212
7.10 How Entrepreneurs Craft Strategy ………………………………….. 213
7.11 Developing Entrepreneurial Strategy ………………………………. 214
7.12 The Strategy Development Framework …………………………… 215
7.12.1 TOWS Matrix Analysis …………………………………………….. 216
7.12.2 Assessing Competitive Threats …………………………………… 216
7.12.3 Assessing Market Opportunities …………………………………. 216
7.12.4 Assessing Resource Weaknesses ……………………………….. 217
7.12.5 Assessing Resource Strengths ………………………………. 217
7.12.6 Dynamic Capabilities ………………………………………….218
7.13 Strategic Planning Responses …………………………….. 219
7.13.1 The Shopkeeper …………………………………………… 219
7.13.2 The Salesman ………………………………………………….. 220
7.13.3 The Administrator …………………………………………….. 221
7.13.4 The CEO …………………………………………………………… 221
7.14 Use Your Common Sense ………………………………………… 221
References ……………………………………………………………….. 222
8 Risk Management in Innovation ……………………………….. 227
8.1 Introduction ………………………………………………………..227
8.2 Risk Management …………………………………………… 227
8.3 Risk Management in Entrepreneurial Ventures …………… 228
8.3.1 Proximity Effects ………………………………………………228
8.3.2 Informality ……………………………………………………….229
8.3.3 Resource Scarcity ……………………………………………….. 229
8.4 Planning and Entrepreneurial Risk Perception …………………. 230
8.4.1 The Notion of Risk …………………………………………….230
8.4.2 Entrepreneurial Risk Perception ………………………………… 231
8.4.3 The Impact on Planning Behaviour ……………………………. 232
8.5 Plan or Just Storm the Castle? ……………………………………….234
8.6 Absorptive Capacity and the Management of Risk ………………………. 236
8.7 Commercialisation and the Systematic Management of Risk …………238
8.7.1 Fuzzy Front-End ……………………………………………………. 239
8.7.2 New Concept Development …………………………………………. 240
8.8 Assessing the Technical and Market Risk …………………………….241
8.9 Managing Risk, General Principles and Techniques …………….242
8.9.1 Technology Project Risk Model …………………………. 243
8.9.2 Quantifying Risks …………………………………………..244
8.9.3 Failure Mode and Effects Analysis (FMEA) ………………244
8.9.4 Anchored Scales ………………………………………245
8.10 Portfolio Management Approach ………………….248
8.10.1 Value Maximisation ……………………………….. 249
8.10.2 Balance ………………………………………………… 249
8.10.3 Strategic Direction ……………………………………………. 249
8.10.4 Right Number of Projects ……………………………………… 249
8.11 Real Options Reasoning and Decision Tree Analysis …………… 250
8.11.1 The First Chicago Method ………………………………..250
8.11.2 Decision Tree Analysis ……………………………………….251
8.12 Assessing the Risk-Return for an Innovation: Innovation Rent ……….. 251
8.12.1 The Theory of Innovation Rents …………………………… 253
8.12.2 Typology of Innovation Rents ……………………………… 254
8.12.3 The RENT Configuration and Planning …………………………257
8.13 The Risk-Return of Commercialisation Pathways …………….. 258
References …………………………… 260
9 Disruptive Innovation and the Commercialisation of Technology ………….. 265
9.1 Introduction ………………………………………………………………….265
9.2 Innovation as a Key Economic Driver ………………………………….. 265
9.2.1 Patents, Trademarks and Productivity ………………………….268
9.2.2 Global Collaboration Is Critical ……………………………. 269
9.3 Defining Technological Innovation …………………………………….271
9.4 Evolution of Strategic Technology Management ……………………..271
9.5 The Impact of the Fourth Industrial Revolution …………………….. 273
9.6 The Strategic Management of Technology ………………………..274
9.7 Commercialisation of Disruptive Technologies ……………….. 276
9.7.1 Consider the Readiness of the Market ………………………….. 277
9.7.2 Consider the End User ………………………………………… 277
9.7.3 Beware Existing Market Players ………………………………………. 278
9.7.4 Look for Market Gaps ………………………………………………………278
9.8 Steps to Developing Disruptive Technologies …………………………… 279
9.9 How NTT DoCoMo Created Japan’s G3 Network ……………………….281
9.10 Strategies for Disruptive Technologies ……………………………………..283
9.11 Market Adoption of Technological Innovation ………………………284
9.12 Creating New Market Space …………………………………………….. 286
9.12.1 Blue Ocean Versus Red Ocean Strategy …………………………… 286
9.12.2 Value Innovation …………………………………………………………287
9.12.3 Creating New Market Space ……………………………………………288
9.13 New Product Development and Commercialisation ……………… 290
9.14 The Stage-Gate® Process …………………………………………………. 292
9.14.1 Spiral Development Via Stages and Gates …………………………. 293
9.14.2 Criticism of Stage-Gate® ………………………………………………. 295
9.15 The Lean Start-Up Process ……………………………………………… 296
9.15.1 Principles of Lean Start-Up …………………………………………… 297
9.15.2 The Lean Start-Up Framework ………………………………………… 298
9.16 Best Practice in NPD ……………………………………………………… 299
9.17 The Innovation Diamond ………………………………………….301
9.18 Commercialisation Pathways for Disruptive Innovation ………………. 302
9.18.1 Commercialisation Pathways and Innovation
Rent Analysis ……………………………. 304
References ………………………………..308