Entrepreneurial Challenges in the 21st Century

Creating Stakeholder Value Co-Creation

S M Riad Shams, Hans Kaufmann

• Publisher: Palgrave Macmillan
• Year: 2016
• Print ISBN: 9781137479747
• eBook ISBN: 9781137479761
• Topic: Negocios y empresa
• Subtopic: Estrategia empresarial

Entrepreneurial Challenges in the 21st Century analyses the traditional and contemporary issues of entrepreneurial innovation potentials for stakeholder value co-creation, and structures the entrepreneurial co-creation concept to reinforce co-creation.

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Perspectives of Entrepreneurship and Its Impact on Stakeholders’ Co-Creation

Ridhi Arora

Introduction

In the past decade, the topic of entrepreneurship has undergone a lot of scholarly examination by academics and management practitioners (Naudé, 2013). Entrepreneurship aims to bring about the cohesive integration of social, economic, institutional, and cultural environments, both at the individual level and the group level. The entrepreneurship concept has been built on the strong historical roots that have led to advancements in entrepreneurial research and its related areas. This chapter provides coverage of the various theoretical perspectives underlying the origin and evolution of entrepreneurship. As the concept of entrepreneurship represents a “multifaceted phenomenon” (Toma et al., 2014), I will explain in this chapter the various definitions of “entrepreneur” and “entrepreneurship”. Further, I will integrate the various theoretical perspectives that form the strong roots for development in the field of entrepreneurship based on the work of eminent scholars. I will also highlight the role and significance of various entrepreneurial perspectives in influencing stakeholder co-creation. For example, the role of entrepreneurial activities has been recognized in economic growth and development. Besides this, entrepreneurship also provides opportunities for a company or a firm to take on a start-up project to foster creativity and innovation which further helps in value co-creation. Entrepreneurial behavior also inculcates risk-taking behaviors for managing the uncertainties of the labor market. Similarly, entrepreneurship may also entail projects that utilize applications for a specific technology, the launch of new ventures, the introduction of new applications, and the exploiting of opportunities that rely on scientific and technical knowledge.

Key concept and definitions of entrepreneurship

The evolutionary journey of entrepreneurship began with the work of Richard Cantillion who first described an entrepreneur as a person who exercises business judgment in the face of uncertainties. Several other academics and scientific investigators have attempted to explain the concept of entrepreneurship. Schumpeter (1936) stated that “entrepreneurs are not only ‘independent’ business people in an exchange economy, but all [those] who fulfil the functions, including ‘dependent’ employees of a company” (p. 75). Later, he reiterated that “the function of entrepreneurs is to reform or revolutionize the pattern of production by exploiting an invention or, more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way, by opening up a new source of supply of materials or a new outlet for products, by reorganizing an industry and so on” (p. 132; see also (Schumpeter, 1942).

Drucker (1985) defined entrepreneurship as the act of innovation that endows the available resources with new wealth-producing capacity. Similarly, Kirzner (1985) explained entrepreneur as the one who perceives profit-making opportunities and also engages in action planning in order to fulfill unsatisfied needs and improve inefficiencies (Bull and Willard, 1993). A clearer meaning to the term was discussed by Gartner (1990) who elucidated two different schools of thought – the first based on the characteristics of entrepreneurship (e.g. innovation, growth) and the second based on the outcomes of entrepreneurship (e.g. value creation) (Sharma and Chrisman, 1999). Additionally, entrepreneurship can also be understood through actions based on the “acts of organization creation, renewal, or innovation that occur within or outside an organization” and which may constitute “individuals or groups of individuals, acting independently or as part of a corporate system, who create new organizations, or instigate renewal or innovation within an existing organization” (Sharma and Chrisman, 1999, p. 17).

According to the behavioral perspective, entrepreneurship includes a set of all those behaviors that influence the initiation and management of the reallocation of economic resources for the purpose of value creation (Herron and Robinson, 1993). A people-oriented definition highlights that “entrepreneurship is a process that involves the discovery, evaluation, and exploitation of opportunities to introduce new products, services, processes, ways of organizing, or markets” (Shane and Venkataraman, 2000, p. 219). Entrepreneurship also serves as an additional resource for exploiting newer opportunities by creating and growing new business firms (Gries and Naudé, 2011; Toma et al., 2014). The next section provides a detailed overview of the various theoretical perspectives and their implications for stakeholder co-creation.

Perspectives of entrepreneurship

Entrepreneurship serves as one of the most potent engines for driving the economic growth as well as the economic processes of any nation (Gorman et al., 1997). It is for this reason that there has been a growth in interest among researchers studying entrepreneurship and entrepreneurial behavior. In this context, research in the field of entrepreneurship is rich and complex, which can be best understood by visiting the various theoretical underpinnings that lay down a strong foundation for the entrepreneurial phenomenon (Mole and Ram, 2011) as discussed in the following.

Economic perspective

The work on entrepreneurship began with the contributions from the French writers who first recognized its significance. Amongst these, the most popular work is that of Richard Cantillion who pioneered the French coinage of the term “entrepreneur”. Cantillion (1680–1734) defined an entrepreneur as someone who engages in profit-making activities and also exercises business judgment in challenging times. He stated that entrepreneurs buy at a certain price so as to sell at an uncertain price, the difference being a profit or a loss (Nagarajan, 2011). He emphasized the role of the entrepreneur as that of an economic agent who acts as a connecting link between producers and consumers. Though he classified economic agents into three categories of landowners, entrepreneurs and hirelings, he mentioned the first and the third categories as passive ones, in contrast to the second entrepreneur category (Grebel et al., 2001).

Functional perspective

On similar lines, Quesnay (1888), who was a founder of the “Physiocratic School”, defined entrepreneur as an independent owner of a business endowed with energy and intelligence. Later on, Jacques Targot (1727–1781) added a capitalist view to the entrepreneurial theory by considering entrepreneurship as the outcome of a capital investment decision. According to him, the owner of capital can become an entrepreneur if he decides to buy goods for running his business. This was followed by Jean-Baptiste Say (1767–1832) who built on Targot’s work and made a clear distinction between the entrepreneur and capitalist. He also noted that the function of an entrepreneur is not only to understand the technology, but also to transfer the knowledge into tradable products so as to fulfill the customer requirements (Grebel et al., 2001).

Schumpeter’s perspective (1883–1950)

In the evolutionary history of entrepreneurship, Schumpeter’s perspective is considered the most renowned concept, popularly known as “Schumpeter’s entrepreneur”. Schumpeter talks about the dynamics behind the occurrence of economic change that considers entrepreneur as the most potential economic agent for bringing about innovation. According to him, the static situation of the equilibrium could be achieved only when the decisions and action planning of the economic actors coincide and end up in equilibrium, so that there is no scope for change to take place (Grebel et al., 2001). Though Schumpeter’s perspective places an undue importance on promoting innovation, it ignores attributes like a risk-taking attitude as an inherent characteristic of entrepreneurs, though he considers it to be important for capitalists (Nayab, 2011). He further emphasized that to better understand the entrepreneurial phenomenon, it is critical to know about the various forces that trigger change across industries, economies, markets, communities, societies and other political systems (McCraw, 2006; Jones and Wadhwani, 2006). Another key feature of Schumpeter’s entrepreneurship as highlighted by Nayab (2011) is its focus on the appropriate conditions that necessitate entrepreneurial activities:

•creation of a new product;

•discovering a market for the product’s promotion;

•locating sources for a new product;

•finding innovative ways for making new products.

Knight’s perspective (1885–1972)

Knight’s perspective of entrepreneurship highlights that the main function of an entrepreneur is to serve as a protective shield for all the stakeholders against uncertainty. He further showed that in order to make profits, it is important for an entrepreneur to perform three major tasks: to initiate innovation, to adapt to changing environmental situations, and also to be proactive enough to understand the consequences pertinent to uncertainty beforehand (Bula, 2012). Knight’s theory of entrepreneurship is considered as a refinement of the Cantillion theory (Hébert and Link, 1989).

Kirzner’s perspective

Kirzner’s perspective on entrepreneurship is viewed as one of the leading perspectives on production, exchange and market efficiency. His theory strongly stressed the concept of “alert entrepreneurs” who are responsible for discovering and exploiting new business opportunities by eliminating the factor of “utter ignorance” to help the economy move towards the equilibrium stage (Bula, 2012). Specifically, Kirzner’s perspective of entrepreneurship centers on the process of bringing an economy closer to the equilibrium stage. He further showed that any improvement in the production technique or shift in preferences is likely to create a disequilibrium stage in the market which can only be corrected by alert entrepreneurs through the creation of opportunities for production and exchange (Bula, 2012).

Behavioral perspective

The behavioral approach identifies the significance of personality traits in influencing entrepreneurial success or failure. For example, according to Aldrich and Zimmer (1986), an internal locus of control, aggressiveness, a low aversion to risk-taking, an ambitious nature and a high need for achievement constitute useful entrepreneurial characteristics. On similar lines, Chell et al. (1991) considered being creative, innovative, proactive and imaginative as useful personality characteristics of entrepreneurs. He further emphasized the crucial role of these personality traits in differentiating entrepreneurs from managers and business owners (Nandram and Samsom, 1997).

Network perspective

The network approach to entrepreneurship represents a powerful attempt at understanding how entrepreneurship theory is embedded within the social context. For example, Birley (1986) stated that there are two forms of networks – formal (banks, lawyers etc.) and informal (family, friends); however, their study specifically focused on entrepreneurs from informal networks. A little later, an advance was made by Aldrich and Zimmer (1986) who stated the entrepreneurial process to be “embedded in a shifting focus of continuing social relations that facilitate and constrain” and to be “linkages between aspiring entrepreneurs, resources and opportunities” (Low and MacMillan, 1988, pp. 150, 8–9). The research by Aldrich and Zimmer (1986) also showed how entrepreneurship theory is contextual and process oriented under the influence of various social factors (Low and MacMillan, 1988). On parallel lines, Gartner (1985) suggested a framework comprising four major perspectives in entrepreneurship, specifically for the purpose of venture creation, as: (1) understanding the characteristics of an individual who starts a venture; (2) the organization as created by him or her; (3) the environmental factors surrounding the new venture; and (4) the process by which the new venture is initiated (Low and MacMillan, 1988).

Stakeholder co-creation

Co-creation represents one of the most emerging paradigms in the value-creation process. To illustrate the concept of co-creation, several definitions have been put forward. According to Prahalad and Ramaswamy (2004), the value of co-creation practice is based on the four building blocks of dialog, access, risk assessment and transparency. The interactive dialog encourages multiple actors within a network to go for shared learning and communication. An access to various resources facilitates a better exchange of ideas of the new products and services. Risk assessment helps consumers in getting potential risk-related information on specific issues from the company. And transparency contributes to facilitating trust and collaboration with consumers. Later on, Sanders and Stappers (2008) considered co-creation as the act of co...

Table of contents

• Cover
• Title
• 1  Perspectives of Entrepreneurship and Its Impact on Stakeholders Co-creation
• 2  The Future of Entrepreneurship: Concept and Context
• 3  Entrepreneurship: Practice-Based Theorizing
• 4  Value Co-Creation and Entrepreneurial Challenges in Business Networks: What Factors Impact Upon the Performance of Firms in Networks?
• 5  Dynamic Capabilities and Value Co-creation in Low-Tech Knowledge-Intensive Entrepreneurial Ventures
• 6  Enterprising Culture: Innovation and Value-Network
• 7  The Impact of an Enterprising Culture on Innovation and Value Networks: The Case of Cypriot Companies
• 8  Entrepreneurial Innovation and Stakeholder Relationship Management
• 9  Entrepreneurial Initiatives and Competitive Advantage in Technology-Based Companies: The Role of the Founding Team
• 10  Entrepreneurial Initiatives, Organizational Performance and Value Co-Creation: Evidence from a Business-to-Business Context
• 11  Opportunities for Entrepreneurial Development and Growth through Online Communities, Collaboration, and Value Creating and Co-Creating Activities
• 12  Entrepreneurial Co-Creation and Cross-Border Manifestos
• 13  Analysis of the Impact of the Cultural and Institutional Characteristics of the Gulf Cooperation Council States on Entrepreneurship: Opportunities and Challenges
• 14  Open Design in Advanced Manufacturing Production
• 15  Technological Innovation and Entrepreneurial Co-creation: An Analysis of Brand Identity and Virtual Brand Communities
• Index