Entrepreneurship (Fach) / <3 (Lektion)
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Theory of the entrepreneur
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- Definition of SMEs l Two types of definitions 1. Qualitative approache Human Dimension : Personification of the firm Independent Management Ownership of Capital Main shareholders ( > 50%) Managers and their family 82% Other Shareholders 16% No 2% Ties between the entrepreneur and his firm Manager = Founder or member of the founding family 71% Managers withour family ties with the firm 29% Family Business: majority of the shares and main management functions belong to the family Other qualitative criteria: BOLTON REPORT Firm managed in a personalized way Small market share Independence Unspecialized management Other ones Flat organizational structure Weak bargaining power Integration within local collectivity Financing problems Dependence upon a small number of clients Less dependant upon existing products or techniques : innovation Not often objective of profit Intuitive and weakly formalized strategy important criterion is the owner-manager relationship
- Definition of SMEs l Two types of definitions l Quantitative approach Problem: vary from one country to the other or according to policies (fiscal, aides,industrial, etc.) The E.U.’S Definition Any entity engaged in economical activity with less than 250 persons; either turnover < 50 million EUR or annual balance sheet total < 43 million EUR Independence (Voting rights detained by another enterprise < 25%) 6% Small Firm : employs < 50 persons turnover or balance sheet < 10 mil. Eur. 93 % Micro-Firm: Employs < 10 persons Turnover or balance sheet < 2 million Eur. Average Size: 6 Persons SMU Represent 99,8% of all the firms (18.5 Million) in the EU
- Economic theories of an entrepreneur Economic theories 1. CANTILLON : person who takes the risk to start a business on his own 2. SAY : person who, on his own, produces a new utility (new product or process): role in the production process 3. MARSHALL: skills necessary to detect opportunities aimed at satisfying a need or enhancing an existing process 4. KNIGHT: profit is the residual revenue remunerating the entrepreneur for assuming uncertainty risks
- CLASSICAL ECONOMIC MODEL 1. The firm makes a calculation which allows it to optimize its profit 2. Success or failure < material variables 3. Entrepreneur = economically rational producer who applies certain rules of max. 4. In a world of perfect information where decision = mechanical calculation, no room for entrepreneurs
- THE SCHUMPETERIAN ENTREPRENEUR Hypothesis: the norm of an economy = disequilibrium The entrepreneur: different perception of reality -> First to be conscious of changes and opportunities Role = innovate, revolutionize prod. routines vigilance in face of disequilibria
- Psychological Approach: School of Traits Aim: distinguish entrepreneurs from other economic agents Postulate: it is possible to identify psychological characteristics (traits) These traits could explain and predict human behaviors, such as E-ship McClelland : Need for achievement propensity to take risks Davids: Desire for autonomy and self-confidence Winter: Desire for Power Borland: Internal locus of control Kets De Vries: Deviant personality Other characteristics identifies by researcers: Analytical Skills, Aggressive, Learners, Leadership, Original, Initiative, Leadership, Tolerance for ambiguity, Sense of responsibility, Perseverant, Result-oriented
- Critics of behaviorists Postulate: natural characteristics; would mean that within a given economy, the supply of entrepreneurs would be fixed - Research results do not allow to establish an absolute psychological profile or to predict behaviors - More broadly, these researches neglect the environment
- Influence of the environment WEBER: system of values fundamental to explain entrepreneurship Social and cultural environment : values (profit, commerce), religion (protest, cath, mus), immigration, etc. Family context Work environment (low resp, lack of power, disagreement with pol., etc.) School system Institutional system (fiscal system, administration, state interventionism)
- Typologies Smith: 1. Craftsman Limited educ. Former worker Mastery of machines paternalistic not sociable Short-term approach Low innovation sectors 2. Opportunist Schooled Former manager Growth Delegates Communicator LT approach Innovation