Entrepreneurship Development/Skills.

Topic Two: Emerging Issues In Entrepreneurship

Week 02:
Lecturer: Wagima Christopher (PhD Fellow)
chriswagima@gmail.com/christopher.wagima@iuea.ac.ug
+256-782086607
 Learning Objectives
At the end of this lecture you should be able to:

• Discuss various entrepreneur myths that exist.

• Examine theories of entrepreneurship.

• Explore the relationship between culture and entrepreneurship.

• Examine the relationship between gender and entrepreneurship.

• Examine ethical and social responsibilities surrounding entrepreneurs.

 Introduction:

• In Lecture one, we noted that there are many interpretations and definitions of
entrepreneurship.

• According to intellectuals and business experts, the definition of entrepreneurship

is simply the combining of ideas, hard work and adjustment to the changing
business market. When a person chooses to become an entrepreneur, they choose
to be an organizer. However, not everyone is suited to being an entrepreneur and
not everyone has the necessary skills to do so successfully.
 Entrepreneurship Myths
The National commission of Entrepreneurship (NCE), of America has highlighted
six (6) myths about entrepreneurs. These include:-

1. The Risk-Taking Myth: “Most successful entrepreneurs take wild, uncalculated

risks in starting their companies.”

2. The High-Tech Invention Myth: “Most successful entrepreneurs start their

companies with a breakthrough invention – usually technological in nature.”

3. The Expert Myth: “Most successful entrepreneurs have strong track records and
years of experience in their industries.”
 Entrepreneurship Myths

4) The Strategic Vision Myth: “Most successful entrepreneurs have a well-

considered business plan and have researched and developed their ideas before
taking action.”

5) The Venture Capital Myth: “Most successful entrepreneurs start their companies

with millions in venture capital to develop their idea, buy supplies, and hire
employees”

6) Entrepreneurs are Born

Other Myths surrounding entrepreneurship

• Entrepreneurs are doers not thinkers

• Entrepreneurs are academic and social misfits

• Entrepreneurs must fit the profile

• All entrepreneurs need money

• All entrepreneurs need is luck

• Entrepreneurship is unstructured & chaotic

• Most entrepreneurial initiatives fail

 Theories of entrepreneurship
• Various theories have been advanced to explain;

• How entrepreneurs act (i.e. what it is they do);

• What happens when entrepreneurs act (i.e. what are the

outcomes of their actions)

• Why people choose to act as entrepreneurs (i.e., what motivates

them to be entrepreneurs).
 Theories of entrepreneurship
Traditionally, there are three theories that explain the concept of entrepreneurship:

• Economic

• Social

• Psychological
ECONOMIC THEORY
• There are diverse opinions in economics about the nature of
entrepreneurship and whether it exists in a dynamic, static or
turbulent economic system.

• The majority of economic approaches attempt to explain how

entrepreneurship works and the function it serves in the
economic system.

• Three approaches explain the entrepreneurship in this theory

i.e.
Equilibrium approach
• This approach seeks to identify fundamental “laws” to explain
the economic system, and assume that there are general
principles explaining society

• In this approach the “firm” represents its own “reality”, which

is independent of the motivations, rationality and fallibility,
associated with individuals.
cont...
• The market conditions are stable

• Every thing in the market is known

• It considers only the forces of dd and ss

• Neglects entrepreneurial action

• Thus entrepreneurship can’t co-exist with this assumption since it requires rule
violating behaviour
Disequilibrium Approach
• These theorists do not attempt to construct equilibrium models
of the economic system based on general principles but sought
explanations based on observations of experience.

• That equilibrium does not occur in the “real” economy

Cont....
• They suggest that there are opportunities for profit within
economic systems because of inequalities between supply and
demand

• Thus entrepreneurial actions are designed to exploit these

opportunities, driving economic systems towards equilibrium.

• Kirzner (1973) argued that the role of an entrepreneur is to

exploit information asymmetries in the markets in order to
bring the markets to eventual equilibrium.
Cont...
• The approach allows for human influence over economic structures, recognizing
the limits of knowledge, information and expecting greater unknown
disequilibrating forces to impact on economic systems in unexpected ways.
Revolution-equilibrium Approach
• Joseph Schumpeter (1934) developed a rule-breaking theory of
economics in which he described a creative destruction of industrial
cycles.

• Disruption is the normal state of a healthy, vibrant economy helping to

move the economy from one state of equilibrium to another.

• Creative destruction", initiates and sustains the process of development,

and is what entrepreneurship does
Cont...
• The key function of the “entrepreneur” is to innovate; conceptualizing
human action at the individual rather than the collective level.

• Schumpeter moves away from equilibrium theories by arguing that

creative destruction involves periods of stability in economic systems
followed by periods of transformation, within which he places the
entrepreneurial function.
 Motivation to act
• How the entrepreneur acts at a given time and place depends heavily on the
reward structure in the economy or the prevailing rules of the game that govern
the payoff” to entrepreneurship

• People choose entrepreneurship if the total utility they expect to derive (via
income, independence, risk bearing, work effort, and perquisites), is greater than
from their best employment option.
 SOCIOLOGICAL THEORIES
• Sociological theories try to explain entrepreneurial behavior as a function of the
person and environmental conditions or the reality individuals live in.

• The nature of populations influences the distribution of resources and indirectly

shapes entrepreneurial processes.

• Sociologist view environmental factors (that include culture, networks, access to

capital, mobility, and government policies) as key in fostering entrepreneurship.
 SOCIOLOGICAL THEORIES
• Sociological models that explain entrepreneurship include;

• The social development (capital, transport, education facilities etc)

• The Demographics (family background, birth order, role model, marital status, age,
educational level of parents and self, socio-economic status, previous work
experience and work habits)
 CON’T
• Socio–cultural values (value attached to innovation, risk taking, entrepreneurship,
hard work and independence, the scorn associated with failure and error, and
reactions to change in a society)

• Social learning through socialization (role models)

• Social Networking

• The human capital perspective (education level, experience, exposure etc)

CON’T
• Environmental Dimensions (political, technological aspects, natural resource
endowment)

• Entrepreneurial environment refers to those environmental attributes that have an

impact on entrepreneurial behavior and that interact with the entrepreneurial
process.

• It has both affective and rational factors

• Affective factors - are attributes of the social environment that include social
identification, role models, and social norm.

• Rational factors - refer to rational and calculating thinking of individuals, and

include financial expectations, perceived opportunity, and perceived availability of
resources
 PSYCHOLOGICAL THEORIES
• Psychological theories associate entrepreneurial tendencies to the individual’s
personality, mental and physical make-up.

• This theory argues that entrepreneurs are born!

 Two approaches
• The Traits approach which suggests that Individuals with certain characteristics
always find the path to entrepreneurship regardless of the environmental
conditions.

• The cognitive Theory suggests that entrepreneurial success is closely related to the
way entrepreneurs perceive information, think and process knowledge, this
distinguishing entrepreneurs from other persons.
Con’t
Examples of cognitive mechanisms include;
• Alertness
• The planning fallacy - a tendency to assume that one can accomplish more in a given
period of time than is actually justified.
• Overconfidence - the tendency to underestimate our lack of knowledge or to think
that we know more than we really do.
• Self-efficacy - cognitive conviction in one’s capabilities to perform
Entrepreneurial schools of thought

•Environment
•Financial
•Displacement
Macro

•Traits
Micro •Venture opportunity
•Strategic formulation
 Culture and Entrepreneurship
• Ethnic entrepreneurship is ‘a set of connections and regular patterns of
interaction among people sharing common national background or migration
experiences’ (Waldinger et al., 1990a:3). Since the emphasis for theoretical
explanations of this phenomenon is based upon those patterns of interaction, the
focus of the majority of studies in this area is the ethnic group. Various definitions
for the term ‘ethnic group’ have been suggested.
 CON’T
• Ethnic ownership economy consists of small and medium-size businesses owned
by ethnic or immigrant entrepreneurs and their co-ethnic helpers and workers.

• Ethnic control economy refers to industries, occupations, and organization of the

general labor market in which co-ethnic employees (not owners) exert appreciable
and persistent economic power.

• The ‘ethnic controlled’ economy is completely independent of the ‘ethnic

ownership’ economy. The participants in the ethnic controlled economy exert
control rather than ownership authority.
 Culture and Business
• As an entrepreneur, you will come into contact with all kinds of people.

• Many of these people will be from cultures different from yours whether your
business operates only in all over the world, you will need to become familiar with
and learn to respect other cultures.
 Culture and Business
• Culture is a set of customs, beliefs, and social attitudes that characterize a
particular group of people.

• Every society has its own culture, and even culture and its own characteristics.

• Arab culture emphasizes traditional religious belief and family values. Chinese
culture emphasizes respect for older people and commitment to family.

• Traditional nature American culture emphasizes respect for nature.

 Culture and Business
As an entrepreneur, you need to appreciate different cultures because:

• You need to be comfortable with your customers. If you are open to other cultures
you can attract more customers.

• People from different cultures may have different needs and wants. Understanding

these can help you market your business more efficiently with locally and

internationally.
 Culture and Business
As an entrepreneur, you may have to work with people from different cultures. Hence, there are at least five

things that you can do to develop these relationships.

• Avoid stereotyping people. Do not assume that all people form a particular ethnic or cultural group behave

the same way or like the same thing.

• Focus on similarities rather than differences. Most people, regardless of their culture, want the same things

in life.

• Learn about different cultures. Learning about different cultures will make you more comfortable around

people from that culture.

• Make friends with someone from a different culture. This can help you begin to appreciate different

cultures.
 Culture and Business
If you do business approach, you will need to learn about cultures of the countries in
which you

• Plan to operate. Hence,

• Familiarize yourself with other cultures.

• Speak the language.

• Research different cultures.

• Understand cultural practices.

• Develop cultural sensitivity.

 Gender and Entrepreneurship
• Women constitute around half of the total world population. In traditional
societies, they were confined to performing household activities. In modern
societies, they have come out to participate in all sorts of activities.

• Women entrepreneurs may be defined as a woman or a group of women who

initiate, organize and run a business enterprise.

• In terms of Schumpeterian concept of innovative entrepreneurs, women who

innovate imitate or adopt a business activity are called women entrepreneurs ‘?
 Con’t
• In a nutshell women entrepreneurs are those women who think of a business
enterprise, initiate it, organize and combine the factors of production, operate the
enterprise and undertake risks and handle economic uncertainty involved in
running a business enterprise.
 What would Motivate Women to Become
Entrepreneurs?
Most women entrepreneurs have similar motivational drives as that of their male
counterparts’.

• Being one’s own boss

• Opportunity to make more money

• Belief that running one’s own business is more compatible with balancing ones

familiar role.

• The fact that corporate worlds have opened up more opportunities for women. It

also appears that women who set up their own business because of the following
 Con’t
• Had become frustrated with demanding but unsatisfying work environment

• Had a need to earn a reasonable living

• The inflexibility and unaccommodating nature of the corporate world two men’s
situations

• The problem of discrimination and the glass ceiling effect that deprives women to
achieve more senior executive positions.
 Challenges/Barriers
Challenges/Barriers that Prevent Women Entrepreneurs from Reaching their full
Potential (Negative influencing factors to women entrepreneurs in your respective
countries)
• Unequal access to property and land
• Taxes and customs
• Culture
• Lack of decision making authority
• Limited mobility
• Competition from well established male dominated enterprises
• Lack of enough accurate information
• Lack of enough finance for expansion

• Lack of risk take propensity

• Domestic commitments

• Lower education levels

• Stereotyping

• Poor access to justice

• Stereotyping
 Positive Influencing Factors to Women
entrepreneurs in Your country.
1. Characteristic traits
• Sharp communication skills
• Intuitive people skills
• Consensus building competencies
• Multi-tasking
Con’t
2. Government policies

3. Characteristics traits
 Differences between men and women
entrepreneurs
• Decision making
• Strategy and leadership
• Risk taking
 Recommendations
• Recognition
• Reduce domestic burdens of women
• Access to education
 Social and Ethical responsibilities of the
Entrepreneur
• As an individual, you have personal responsibilities to yourself, to your family,
and to your friends.

• As an entrepreneur, you have responsibilities to your customers, your suppliers,

your investors, your creditors, and your community.
 Responsibilities to customers
When dealing with customers, you should:

• Treat all customers with respect

• Be honest. Never take unfair advantage of customers who do not know everything
about the product or service they want to buy.

• Avoid exaggerating the merits of your products or services.

• Inform customers of possible dangers of the products you well.

• Handle all disputes fairly. Try to see both sides of an issue when there is a
disagreement with a customer.
 Responsibilities to Suppliers
• To ensure that you maintain good relationship with suppliers, you need to:

• Treat all suppliers with respect

• Refuse to participate in dishonest schemes your suppliers may suggest; especially

schemes to conceal payments from Revenue Authorities.

• Give suppliers time to fill your order. Try not to wait until the last minute to ask for

supplies.

• Handle all disputes fairly.

• Let your current supplier know the reason for your decision if you change suppliers.
Responsibilities to Creditors and Investors
• Creditors and Investors have shown faith in your ability to succeed. To repay
them, makes them have confidence in you, you should run your business as
carefully as possible.

• Never conceal losses and things negative about the business from them.
 Responsibilities to your Community
• Contributing money to charities, cultural institutions, and causes in which they
believe. Not all businesses can make large contributions, but any donation is
welcomed.

• Donate products or services used. Used clothing stores donate unsold clothes to
charities.

• Get involved in issues affecting local authorities i.e. cleaning parks, or get
involved with charitable organizations, volunteering both time and money.
 Responsibilities to your Employees
Whenever society changes, businesses have to respond. In order to attract and retain
good employees, you will have to become sensitive to the needs of the people who
work for you by:

• Accommodating your employees’ family needs.

• Considering flexible working hours e.t.c.

 Respect the Environment
As an entrepreneur, you will have an obligation to do as little harm as possible to your
surroundings. To meet your environmental responsibilities, you should:

• Protect the environment from pollutants, Conserve non-renewable resources,

• Reduce waste and dispose of waste responsibly. Recycle materials such as paper, plastic,
glass, steel etc..

• Use environmentally safe and sustainable energy sources to meet your business needs.

• Sell products that cause as little damage to the environment as possible for example, do
not sell a car wash solution that kills plants.
 Activity
1. Give an account of growth of women entrepreneurs in your respective countries.
2. It is important for entrepreneurs always to act in an ethical manner? Why or why
not?
3. Explain the concept of social responsibility
4. Why are some communities more entrepreneurial than others
5. Advance the view that Western Nations (especially Americas) are more
entrepreneurial than developing countries (i.e. your country)
6. Advance the view that certain ethnic communities are more entrepreneurial than
others.
7. What career paths are available for entrepreneurs in your respective countries.
 End
• THANK YOU

9:53 PM