DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY, INC.

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

LEARNING MODULE
ENTREPRENEURIAL MANAGEMENT

Module 2:
The Role of Entrepreneurship in the
Economy and Society

Prepared by:

CHRISTIAN JAY R. MARCOS

Instructor

christianjaymarcos@yahoo.com
cjaymarcos1997@gmail.com

+639954062927

cjaymarcos2020
 DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY, INC.

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

COURSE DESCRIPTION:

The course explores the creation and management of start-up businesses. It concentrates on the initial
strategy, location, financing, staffing, daily activities, controls and taxes. Students develop a business plan for a
start-up business. This course evaluates the necessary qualities and characteristics of the successful
entrepreneurial profile. It helps you recognize and determine the steps necessary to design and develop a start
for profit business and to open and operate a small business enterprise. It describes the basic forms of small
business ownership and identifies the necessary financial competencies needed by the entrepreneur. It further
utilizes information, financial estimates and projection, logic and critical thinking needed to recognize
opportunities.

COURSE OBJECTIVES:

By the end of the course, you should be able to:

1. Explain why entrepreneurship is an important endeavor and identify the main themes in studying
entrepreneurship;
2. Discuss diverse economic and social contributions made by entrepreneurs, new firms and growing
firms;
3. Discuss the views of different scholars on entrepreneurship;
4. Explain the different types of entrepreneurs and how each type impacts on the performance of the
enterprise;
5. Evaluate the various forms of entrepreneurial organizations;
6. Evaluate the extent to which external environmental conditions can shape the pursuit of
entrepreneurship; and
7. Discuss the sources of finance and the challenges faced by entrepreneurs in obtaining finance.

COURSE REQUIREMENTS:

 Class attendance  Case studies

 Quizzes  Reports
 Class participation  Assignments & Activities
 Major examinations

GENERAL INSTRUCTIONS:

This module contains several lessons. Instruction are explained with activities and examples.
Understand and internalize the learning outcomes. Read well the contents of each lesson. A strategy is used to
let you learn and improve your learning ability and to develop your higher order thinking skills. At the end of
each module, there is an assessment/examination. The assessment/examinations will be uploaded in your
respective group chat, together with the deadline of submission. Understand and answer it as directed.

cjaymarcos2020
 DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY, INC.

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

COURSE CONTENT:

I. Introduction: Context and Issue

a. History of Entrepreneurship
b. Defining Entrepreneurship
c. Entrepreneurship as Field of Study
d. Growth of Entrepreneurship Education.

II. The Role of Entrepreneurship in the Economy and Society

a. Positive Contribution of Entrepreneurial Firms
b. Challenges of Entrepreneurial Firms

III. Theoretical Approaches to the Study of Entrepreneurship

a. Approaches to Explore Entrepreneurial Process
b. Sociological and Psychological Approaches
c. A Taxonomy of Entrepreneurial Theory

IV. Types of Entrepreneurs

a. The Nature, Characteristics and Behavior of the Entrepreneur

V. External Environmental Context

a) Layers of the Environment
b) The External Environment
c) The Competitive Environment
d) External Threats and Opportunities

VI. Entrepreneurial Finance

a) The Business Plan
b) Sources of Finance

cjaymarcos2020
 DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY, INC.

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

TOPIC I
THE POSITIVE CONTRIBUTIONS OF ENTREPRENEURIAL FIRMS

Learning Outcomes
By the end of this topic, you should be able to:
1. Explain the role of entrepreneurship in society and the economy
2. Give reasons for emphasis that is placed on entrepreneurship, in particular the role of
entrepreneurship in: - innovation and change, new venture creation, job creation and business
growth;
3. Explain and enumerate the different factors influencing entrepreneurship development

Researchers and society at large have debated on the economic and non-economic contributions made
by entrepreneurs, new firms and a growing stock of entrepreneurial firms. It is believed that entrepreneurial
firms are important because they encourage economic growth, reduce unemployment and poverty.
Entrepreneurial firms have also their equal share of challenges. This unit therefore explains in detail the
contributions of entrepreneurs and entrepreneurial firms to the economy and society and the challenges these
ventures face.

THE POSITIVE CONTRIBUTIONS OF ENTREPRENEURIAL FIRMS

In a business context, entrepreneurship is associated with profit making activities and is perceived to
serve five main functions, namely innovation and change; new venture creation; business growth; job creation
and regional development.

There is also another side of entrepreneurship which is referred to as cultural or aesthetic

entrepreneurship. The main driver is not wealth creation or business capability but creativity. Many successful
businesses have been created by such people. In the process the many successful make money out of their
talent and become extremely wealth, but monetary wealth is not their main motivation. Rather it is their desire
to produce original, imaginative and innovatory work (Bolton and Thompson, 2000). Often times their creativity
is extreme and they possess a determination to succeed that overcomes opposition and criticism. They believe
in themselves and their creative genius, and get satisfaction out of it, often not caring what others think.

Their contribution to the economy and society, therefore, is not to wealth creation as such but to the
enrichment of life, by challenging the status quo and by opening up ways of thinking and behaving that
previously did not exist. Such entrepreneurs (Jensen, 1999) contribute to what may be called “the dream
society’

1. Innovation and change

Innovation is a crucial part of entrepreneurial process. Drucker (1997) believes that innovation is the
specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different
business or a different service.

1|Page cjaymarcos2020
 DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY, INC.

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

In business sense, innovation can mean a lot more than just developing a new product or a new
technology- it encompasses any new way of doing something so that value is created. Apart from meaning a
new product or service, this can also include:

 A new way of delivering an existing product or service

 New ways of informing the consumer about a product and promoting it to them
 New ways of organizing labor and capital in order to produce the product or service, or even
 New approaches to managing relationships with consumers and other organizations

2. New venture creation

Entrepreneurs create and own new ventures. This does not mean that all entrepreneurs do this or that
all new ventures are owned and managed by entrepreneurs. Often new ventures are owned by venture capital
companies or institutional investors. Entrepreneurs possess attributes that enabled him or her to present the
venture in such a way as to attract support of the investors

3. Job creation

Gender- The creation of new ventures creates employment opportunities for both the entrepreneur and others.
Traditionally, males have made up a significantly greater proportion of the self-employed sector than females.
However, there has been a tremendous increase in the number of women taking up self-employment. Self-
employment appears to become increasingly inviting nearer middle age when the potential entrepreneur can
afford the start-up costs of a new venture, redundancy /early retirement is most likely to occur, and the
entrepreneur has the experience to identify opportunities or ways of doing better. However, this does not mean
that young people cannot set up successful new ventures.

Marital status - Self-employment is much less likely for the single people than it is for people in other
categories (married, widowed, divorced or separated). It seems that marriage provides the support necessary
to establish a successful new venture, and spouses are often partners in such enterprises.

Educational level - There have been some contrasting views on the education levels of entrepreneurs, with
Curran and Burrows (1989) believing that self-employed people have a lower level of educational attainment
than wage-earners. However, Daly (1991) and Meager (1991) discovered that the self-employed appear to
have a higher level of education than employees

4. Business Growth

Small firms provide the mean to entry into business for new entrepreneurial talent and the seedbed
from which large companies will grow to challenge to challenge the established leaders. However, research
has revealed that very few new small businesses grow, some do not even survive.

2|Page cjaymarcos2020
 DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY, INC.

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

There are a number of reasons that have been stated why new ventures fail to grow. These have been
classified into: Management and motivation; Sources and Market Opportunities; Structure (Barber et al., 1989).
Cambridge Small Business Research Centre (1992) revealed that financial constraints, the level of demand in
the economy and the nature of competition, suggesting that external factors are more significant barriers to
growth than the internal factors, such as managerial skills or the availability of skilled labor.

Firms that are likely to be limited companies rather than sole traders and partnerships. They tend to be
located in accessible rural areas rather than urban areas or inaccessible rural areas. They are likely to be
owned by individuals who share equity with external individuals or organizations, and who are prepared to
devolve decisions to non-owning managers, to occupy particular segments where they can exploit any quality
advantages they may have, and to be innovative.

Storey (1994:137) suggested that factors that lead to growth are: the motivation for establishing the
business appears to be of some importance with individuals who are “pushed” possibly through
unemployment, into establishing a business being less likely to found a rapidly growing firm than those
attracted by a market opportunity. The evidence suggests that individuals with higher levels of education are
more likely to found rapidly growing firms, as are those with some prior managerial experience. More rapidly
growing firms are more likely to be founded by groups, rather than single individuals. Finally, middle-aged
owners are most like to found rapidly growing firms.

This can lead to the conclusion that perhaps the primary reason for failure is the quality of management
and the inexperience of the founder.

What motivates growth can be one of the following: the personal attitudes, behavior and drive of the
founding entrepreneur and his/her team.

The fact that so few new ventures grow restricts the contribution they make toe the job generation and
economic recovery process. Equally it minimizes the seedbed effect and has led to the suggestion that
perhaps a more selective approach should be taken to new venture creation, whereby the winners are picked
out at birth for special attention and nurturing. It is probable that with appropriate managerial support many
more businesses could make a more significant contribution. Instead of picking out the seeds that are worthy
of more favored attention, perhaps the conditions for growth need to be improved.

FACTORS INFLUENCING ENTREPRENEURSHIP DEVELOPMENT

Entrepreneurship development may be driven by the motivations of individuals seeking to satisfy their
own personal goals. However, while the key to initiating the process of entrepreneurship lies within the
individual members of society, its development is affected by the degree to which the spirit of enterprise exists
or can be stimulated. The question then arises, what are the factors that stimulate or prevent individuals from
behaving in an entrepreneurial manner?

3|Page cjaymarcos2020
 DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY, INC.

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

1. Social-cultural factors

A culture that prizes entrepreneurship, an imperative to educate the population, a government that
generously supports pure and applied science, fosters entrepreneurship with enlightened policies, and enables
schools to produce the best educated students in the world.

The heart of any enterprise culture is the ability to innovate, recognize and create opportunities, work in
a team, take risks and respond to challenges. It is a proactive culture that is about initiating, doing and
achieving. There is no such thing as standard, identifiable and universal culture that stimulates
entrepreneurship. Rather there exists a wide range of cultures that stimulate entrepreneurship to a greater or
lesser extent. If the culture contains pro-entrepreneurial values, it serves as an incubator in the
entrepreneurship initiation. The elements of culture that influence entrepreneurial initiatives are religion,
education, family, history and role models (Morrison, 2000).

2. Political-economic factors

The political system can either promote or retard entrepreneurship directly through the way the
economy is managed. In a democratic country entrepreneurial attitudes and behaviors tend to be encouraged
the liberal policies of the state, whereas in countries where there is strong government and a sense of being
“ruled’, either formally or informally, the tendency is to produce persons who are lacking in the personal
attributes generally associated with entrepreneurs, in particular leadership, creativity, self- reliance and self-
confidence (Morrison, 2000). Many economies have attempted to break a dependency culture and stimulate
entrepreneurship. The trend to privatize public utilities and to develop a more enterprising and business-like
approach to the management of public sector is a manifestation of this. Some countries have tried to stimulate
entrepreneurship by direct intervention and the provision of support to new small enterprises. A carefully
planned program of assisting new firm formation by small-scale entrepreneurs coupled with moderate
privatization may be an answer to private sector growth without adverse national or regional economic impacts.

However, there are other factors that need to be taken into consideration: the state of the economy,
employment levels, industry structure, homeworking and tele-cottaging, network/multiple level marketing,
franchising, and the new dot.com businesses.

 The state of the economy- Entrepreneurship becomes a prerequisite for economic development when
economies are rapidly changing and development is uncertain. In conditions of little change and steady,
predictable economic growth, entrepreneurship is less significant. Traditionally, entrepreneurship and
new venture creation has flourished when an economy has been in recession. In such circumstances
entrepreneurship represents a means by which the economy and the population can break out of the
downward spiral of unemployment and low economic growth. However, the trend is changing as some
economies that are doing well and also have a high percentage of successful new ventures.

4|Page cjaymarcos2020
 DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY, INC.

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

 Employment levels- It is believed that have levels of employment restrict entrepreneurship as

individuals will be sustained by their salaries, while high levels of unemployment foster
entrepreneurship as individuals offer themselves for self-employment. However, unemployment does
not provide good conditions for new venture creation. Research has shown that businesses created by
unemployed people struggle to grow unlike those that are created by those that are in employment
(Storey, 1994).

With continued advent of corporate downsizing individuals might not have options but get into “forced”
entrepreneurship. Employment affects entrepreneurship in a number of other ways. Few governments are now
able to cater for the unemployed because technology has caused a lot of people redundant. Governments,
instead of paying unemployment benefits are availing funds to individuals who would want to create
enterprises.

 Industry structure: - There has been a shift in the structure of economies, with movement out of
manufacturing into the service sector. Because of this shift, there has been an increase not only in the
number of smaller, more flexible medium sized enterprises, but in new opportunities for potential
entrepreneurs. The growth of small consultancy firms in developed and developing countries can be
attributed to this process. Recent years have witnessed the spread of new service sector businesses
that have taken a variety of forms, ranging from homeworking and tele-cottaging, through
network/multi-level marketing, to franchising and new dot.com businesses (Allen et al., 1992;
Stanworth, 1991, Price, 1997).

3. Institutional and organizational factors

There has been a belief that economic growth and national competitive advantage can only be
achieved by economies of scale in production. This belief is anti-entrepreneurial development. However, this
belief is now being overtaken by the era of ‘downsizing’, “delayering”, ‘outsourcing’ and ‘re-engineering’. These
create an environment favorable for entrepreneurship.

Corporate culture can and frequently does, kill entrepreneurship development, particularly if typified by:
 Hierarchical nature of the large corporation
 The bureaucracy involved in formal reporting system, lines of authority and control mechanism
 Short term performance standards
 Loss of ownership
 Career mobility and loss of continuity
 Inflexibility and inability to change direction
 Reward systems based on strict performance measures.

Corporate prestige: - The prestige with which the large corporations are viewed means that suppliers
(whether of money, education, materials or labor, etc.) often prefer to do business with these large
corporations. This tendency kills entrepreneurship.
5|Page cjaymarcos2020
 DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY, INC.

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

TOPIC II
CHALLENGES OF ENTREPRENEURIAL FIRMS

Learning Outcomes
By the end of this topic, you should be able to:
1. Discuss the factors affecting entrepreneurial performance in economy and society
2. Discuss the importance of policies that enhance entrepreneurial development

There are numerous barriers to enterprise. The attitudes of individuals are a major barrier to new firm
creation and development. Most new firms are ‘born to die young’ as most cease to trade within three years of
inception (Storey, 1994). The majority of firms that survive are ‘born small and stay small’. Many small firms
are more interested in maintaining their current level of profit than in expansion. One reason that causes the
small firms to stay small is that the ownership and management reside in the same person, or persons; so
future firm goals are determined not only by commercial considerations but by personal lifestyles and family
factors relating to the individuals or teams of individuals who own and manage them. However, the proportion
of small businesses that want to grow is greater than the numbers that actually do grow.

The major barriers to entrepreneurship have been summarized as: -Macro-economic, cultural barriers
and narrow education base, attitudinal barriers, resource barriers, operational barriers, strategic barriers and
government failure to support enterprise growth.

Macro-economic barriers include:

 Business and personal taxation
 High interest rates
 High or fluctuating exchange rates
 Public spending
 Inflation policy
 Prohibitive regulatory framework

Attitudinal barriers include:

 Reluctance to select a career in enterprise
 Reluctance to move outside the management comfort zone
 Desire for a “born small stay small firm”
 Reluctance to sell equity to outsiders
 Reluctance to use external professional advice

Resource barriers include:

 Lack of adequate information for decision making
 Inadequate finance
 Lack of premises to operate from
 Lack of skilled labor

6|Page cjaymarcos2020
 DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY, INC.

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

 Lack of equipment machinery

Strategic barriers include:

 Focus on low price strategy rather than premium price strategy
 Inability to introduce market and/or technological differentiation
 Inability due to attitudinal and resource deficiencies to create new sources of competitive advantage
 Inability to proactively adapt to constantly changing environment; technological & regulatory conditions

Government failure
 Government supporting firms that do not require assistance & this assistance does not generate
positive externalities
 Government failure to develop policies that supports innovation and new ventures

POLICIES TO SUPPORT ENTREPRENEURSHIP

Most governments are moving away from creating policies that nurtures a dependency syndrome to
culture termed the enterprise culture – the culture whereby both individuals and groups become empowered
and take responsibility for, or ownership of, their own futures, i.e. they become more self-reliant

Before considering the generic measures that can be taken to support entrepreneurship development, think
specifically about the support available to new and small business in an area which you are familiar with.

1. Macroeconomic policies
Although entrepreneurs can probably cope with uncertainty better than most and some actually able to
benefit from it, a stable macroeconomic environment is believed to be crucial to the development of
entrepreneurship and a strong. Hence governments should aim at creating a stable macroeconomic
environment. Low inflation, low interest rates and stable exchange rates are desirable.

Simplifying and reducing the burden of taxation on new enterprises is claimed by many to reduce costs,
encourage investment and increase incentives. A high level of taxation may act as a disincentive to
entrepreneurs (Glancey and McQuaid, 2000). Many countries have moved from direct tax (personal taxation)
to indirect tax (Value Added Tax). Many countries have also simplified the taxation regulations and moved to a
system of self-assessment in an attempt to reduce costs for small firms.

In countries like Japan, large firms are required by law to develop strategic alliances with local small
and medium sized enterprises, using them as suppliers and subcontractors. It is more usual for governments
to encourage their own departments and agencies to support small and medium sized enterprises through their
procurement strategies. This can be facilitated through making sure that government departments have offered
support to small and medium-sized enterprises seeking to secure government contracts. Some governments
are assisting new and small firms in securing market opportunities overseas, through political alliances, trade
missions and the provision of advice, information etc.
7|Page cjaymarcos2020
 DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY, INC.

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

2. Microeconomic policies
These are normally introduced to correct market failure and are intended to help new and existing small
businesses acquire the opportunities, skills and resources they need to survive and grow. Often such policies
are intended to strengthen economic competitiveness by creating a healthy, vibrant business sector. Generally,
they provide what is known as ‘hard’ and ‘soft’ support. Hard support refers to that which is tangible – money,
buildings, equipment etc., while soft support is essentially intangible – education, know-how etc. both can be
provided nationally, regionally and locally, and can be targeted at all stages in the life cycle of the firm, though
frequently they are intended to raise awareness of the opportunities for self-employment, stimulate the birth of
new firms, and facilitate the survival and growth of small businesses.

Frequently new and small firms experience difficulties in raising finance. Funding for new and small
firms normally comes from bodies such as banks, venture capital companies and private investors. There are
also government investment grants, loans and loan guarantee schemes, all intended to ease the flow of
funding to the new and small firm sector.

It is often difficult for new ventures to find suitable premises to operate from. In many countries,
governments have developed small factories and office units for rent or offered subsidies to private property
developers for developing such units. These have ranged from business incubator units to science parks. And
are intended to create clusters of new and small firms’ can benefit from economies of proximity and
association, as well as the provision of common support and advisory services.

Soft support is varied. Training and advice/consultancy are the most widespread forms it takes. This
includes helping prospective entrepreneurs and existing owner-managers acquire general business skills as
well as specialist expertise in subjects such as accounting, taxation, legal issues, marketing and exporting.
These may be provided through the education system or through specialist organizations in either the public or
private sector. Since small firms are often either unwilling or unable to pay for training and consultancy,
governments have generally subsidized their provision, either in full or in part.

Many governments have introduced policies to support innovations in technology. One set of policies is
often targeted at the country’s universities and government research departments and is intended to
encourage commercialization of research.

Public support measures include

 Raising awareness of entrepreneurship through the education system.
 Hard and soft measure to facilitate entry, including the provision of premises and finance
 Funding initiatives and know-how to facilitate growth

Private support has involved:

 The banks
 The professional services sector
 Large corporation
8|Page cjaymarcos2020