COLLECTIVE

ENTREPRENEURSHI
P
How does entrepreneurship reside with a group of people ?
How does it reside at different levels in the firm structure?
Entrepreneurship
 begins with perception and is completed with action
 Often associated with activities of an individual – the entrepreneur.
 Conventional perspective - a highly successful, self-employed individual.
 Reality - Rarely is opportunity perception and exploitation embodied in a single
individual.
 The entrepreneur as a dynamic, not static, figure in economic activity.
 Collective entrepreneurship - combines business risk and capital investment
with the social values of collective action.
 People conducting business together, sharing ownership, responsibilities & rewards.
 Means of risk diversification and fundraising
 Which one is easier to break?
 Entrepreneurship emerges as a
function of collective action
HOWEVER:
 The individual’s incentive not to
contribute increases with group size
 Larger groups are less likely to be
privileged
 The larger the number of people that
need to be coordinated, the higher the
cost of organizing them to an effective
level
 Collective Entrepreneurship
 A form of value-seeking behavior exhibited by groups of individuals that combine
the institutional frameworks of investor-driven shareholder firms and patron-driven
forms of collective action.”
 Combines business risk and capital investment with the social values of collective
action.
 Exists when collective action aims for the economic and social betterment of a
locality by means of some transformation of social norms, values, and networks for
the production of goods or services by an enterprise
 Entrepreneurial activity is exhibited at the level of the individual member-owners
and at the level of the jointly-owned firm.
 Can reside with the joint-owners individually or with the managers of the Common
Firm, or with both.
 COLLECTIVE ENTREPRENEURSHIP
 is a key component of economic growth and development, in which a firm’s entrepreneurship co-aligns
it with the market conditions by building and modifying its resources, competences, and organizational
architecture to respond and influence market conditions and development.
 a process by which entrepreneurs work together for the economic and social betterment of a locality by
transforming social norms, values, and networks for the production of goods or services and taking
risks together.
 implies an increase in the ability of each member of the group whenever they are confronted by the
continued demands and opportunities from the environment.
 a strategy for entrepreneurs to overcome business challenges and accrue economic benefits.
 Collective action is the core of the value chain development.
 Achieve the highest performance when members’ decisions about their own business activities and
investments are aligned with the collective - a risk that members should be willing to take.
 Transition from Individual to Collective
Entrepreneurship
 Collectively-owned firms are settings for collective entrepreneurship.
 is a function of the willingness of individuals to cooperate (work together)
 Responds to the capital limitations of individual actors and to increases in capital
requirements.
 Responds to the economic situation and greater access to resources.
 How does the collective express entrepreneurial spirit and lead to effective
outcomes?
 In collective entrepreneurship, entrepreneurship may be located at the level of the
individual member and at the level of the jointly-owned firm.
 THE OCCUPATIONAL, STRUCTURAL & FUNCTIONAL
VIEWS OF ENTREPRENEURSHIP FUNCTION
 The occupational view - focuses on self-employment and the factors that lead to success or
failure of ventures.
 The structural view focuses on situations and arrangements - firms, clusters, sectors or entire
economies can be labeled as entrepreneurial.
 The functional view - entrepreneurship is a function which any economic actor may exhibit;
 often exhibited in management, leadership, alertness, or innovation; and especially in judgmental
decisions.
 This is transferable, through employment relationship, delegation of decision-making rights.
 Making entrepreneurship a function of judgment decision-making under uncertainty over the
deployment of assets –expressed through ownership and control over assets.
 How then can entrepreneurship be attributed to the firm?
 THE ENTREPRENEURSHIP FUNCTION
AND ORGANIZATIONAL FORM
 Firm Ownership implying the possession of property rights over a firm’s assets.
 The exercise of control over those assets is more complex. It is practiced through
two distinctive components of control, namely:
 decision control (ratification and monitoring) and
 decision management (initiation and implementation)

 The entrepreneurship function, thus consists of three different components:

 ownership,
 decision control, and
 decision management.

 The components may reside with one person, or can be distributed over different
people in a complex organizational structure.
The Entrepreneurship Function Divided
 DECISION MAKING AS AN
ENTREPRENEURIAL FUNCTION
 Managers direct their decisions to the demands of shareholders, if effective control mechanisms
are in place.
 Without effective control, managers are more likely to pursue their own interest at the expense
of shareholder interests.
 Because managers don’t bear the ultimate responsibility regarding the results of their own
actions, they have no incentive to correctly judge over investment decisions.
 In the case of owner-managed firm, the entrepreneurship function resides exclusively with a
single person, giving rise to entrepreneurship in its purest form.
 CE occurs when responsibilities regarding decision initiation and implementation is allotted to
managers, and decision ratification and monitoring to the board.
 CE occurs when the decisions about deployment of assets are taken not by an individual but by a
group of people; resulting from the joint ownership of assets.
 The intra-group differences in judgment over the proper use of the joint assets bear on the efficiency of
the decision-making process.
Factors affecting collective Entrepreneurship

 Social and economic heterogeneity,

 Group size,
 Costs of monitoring rise as group size increases.
 Monitoring is more easily implemented in small groups.
 Economies of scale in large groups.
 The “free rider” problem - individual selective incentives
 Mediating role played by institutions
 Social norms and values like trust, loyalty, social capital etc…
 Age: older organizations are more bureaucratic and less receptive to innovation.
 Why Collective Entrepreneurship
 Historically, cooperatives have played important roles in the development of rural
communities in Uganda, and today this type of business approach can play important roles
in the development of local communities.
 Lately, collective entrepreneurship has been of increasing interest to researchers and
practitioners, especially given the current economic crisis and the search for more robust,
community-centered, and member-owned and -controlled alternative organizational
models.
 Cooperative Entrepreneurship often involve members that share some common prehistory
that binds them together.
 Collective (or social) entrepreneurialism generates resilience during market failure or
difficult economic times, and is advantageous for meeting the needs of underserved
communities
 Why Cooperative Entrepreneurship?
 An aspect that also supports the principles of collective entrepreneurship is the value
system from which African people have evolved, which implies that a person is a person
through other people.
 Cooperative Entrepreneurships voluntary initiated by people who share the same needs
would be the ideal form of business to apply in communities and to get members
involved.
 Cooperative Entrepreneurship can be used to provide local communities with a
mechanism to cope within an economic environment that has ignored their priorities.
 Disadvantaged communities have little negotiating power in obtaining supplies at low
cost and getting the best prices for their products. Through cooperative entrepreneurship,
they can achieve economies of scale in bargaining with outside suppliers and markets.
 Collaborative entrepreneurship
 is the matching of underutilized resources with unexplored market opportunities so as to commercialize
innovation in a community of networked firms.
 Comprise of three types of relationship –
 the jointly owned venture,
 an organizational relationship among cofounders,
 and between co-founders and joint venture.

 Involves interpersonal relationships embedded in existing social and personal relationships with friends,
neighbors, family, or other community members in form of strategic alliances.
 Compared to collective entrepreneurship, collaborative entrepreneurship
 Members’ incomes are less depends on the performance of the jointly-owned firm.
 Is more dynamic, with alliances often more temporary, and partners changing more often.
 Emphasis is mainly on (a) learning and knowledge exchange or (b) complementary assets.
 Emphasis is relatively less on economies of scale and scope through joint investment in tangible assets.
Collective entrepreneurship: Some business models

 Family-Owned Firms
 Family firms may be able to decrease ownership costs relative to non-family firms by
mitigating managerial opportunism, generating long-term organizational commitment, and
communicating more effectively.
 Patron-Owned Cooperatives
 Clusters and Industrial Districts
 close consultation along the production chain delivering the capacity to redesign processes
and products,
 satellite firms established with the aid of an existing firm to fill an industry need.
 no managerial hierarchy,
 Franchise Agreements
 Collective entrepreneurship between the franchisees and the franchise system
(intrapreneurship)
F

► an income-generating organization governed by a plurality of stockholders that

¾ assigns voting rights in proportion to stockholdings and
¾ distributes residual income in proportion to stockholdings.

►
►

Emmanuel Labithianakis - Lefkada, October 12, 2013 8